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CREDIT AND SECURITY AGREEMENT
By and Between
CADAPULT GRAPHIC SYSTEMS, INC.
as Borrower
and
SUMMIT COMMERCIAL/GIBRALTAR CORP.
as Lender
Dated: April 9, 1999
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XXXXX XXXXXXX XXXXXXX, P.C.
Continental Plaza II
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
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Section 1.1 In General 2
Section 1.2 Specific Terms Defined 2
Section 1.3 Rules of Interpretation and Construction 16
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
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Section 2.1 Commitment 18
Section 2.2 Making the Advances Under Revolving Credit Loan 18
Section 2.3 The Loan Accounts 19
Section 2.4 Interest Rate 20
Section 2.5 Payment of Interest 20
Section 2.6 Interest on Overdue Payments 20
Section 2.7 Limitation on Interest 20
Section 2.8 Advances Under Loan; Promises to Pay 20
Section 2.9 Use of Proceeds 21
Section 2.10 Change in Laws 21
Section 2.11 Termination 22
Section 2.12 Security for the Loan 23
Section 2.13 Extension of Maturity Date 23
Section 2.14 Cash Collateral Account 23
ARTICLE III
LETTERS OF CREDIT
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Section 3.1 Commitment and Issuance of Letters of Credit 24
Section 3.2 Risks of Acts or Omissions 24
Section 3.3 Documentation 25
Section 3.4 Action, Inaction and Omissions by Bank 25
Section 3.5 Change in Law or Regulations 25
Section 3.6 Payments and Fees 26
ARTICLE IV
REPAYMENTS
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Section 4.1 Payments and Computations 27
ARTICLE V
LIMIT OF LOANS AND LETTERS OF CREDIT
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Section 5.1 Maximum Commitment 29
i
ARTICLE VI
CONDITIONS TO THE INITIAL EXTENSION OF CREDIT
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Section 6.1 Loan Documents, the Mortgage, etc 30
Section 6.2 Representations and Warranties 30
Section 6.3 Certified Copies of Charter Documents 30
Section 6.4 Proof of Corporate Action 30
Section 6.5 Legal Opinions 30
Section 6.6 Collateral 30
ARTICLE VII
CONDITIONS TO MAKING EACH SUBSEQUENT EXTENSION OF CREDIT
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Section 7.1 Applications and Compliance 32
Section 7.2 Representations and Warranties 32
Section 7.3 Performance, etc 32
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
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Section 8.1 Corporate Existence; Good Standing 33
Section 8.2 Corporate Authority, etc 33
Section 8.3 Binding Effect of Documents, etc 34
Section 8.4 No Events of Default, etc 34
Section 8.5 No Governmental Consent Necessary 34
Section 8.6 No Proceedings 34
Section 8.7 No Violations of Laws 34
Section 8.8 Use of Proceeds of the Loan 34
Section 8.9 Financial Statements 35
Section 8.10 Changes in Financial Condition 35
Section 8.11 Accounts Receivable 35
Section 8.12 Inventory 35
Section 8.13 Taxes and Assessments 36
Section 8.14 ERISA 36
Section 8.15 O.S.H.A. and Environmental Matters 36
Section 8.16 Location of Collateral 37
Section 8.17 Other Liens 37
Section 8.18 Books and Records 37
Section 8.19 Representations and Warranties: True, Accurate
and Complete 37
Section 8.20 Names, Location of Offices 37
Section 8.21 Capitalization; Ownership of the Borrower 38
ARTICLE IX
AFFIRMATIVE COVENANTS
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Section 9.1 Notify Lender 39
Section 9.2 Pay Taxes and Liabilities; Comply with Agreement 39
Section 9.3 Observe Covenants, etc 39
ii
Section 9.4 Maintain Corporate Existence and Qualifications 39
Section 9.5 Information and Documents to be Furnished to the
Lender 39
Section 9.6 Access to Records and Property 42
Section 9.7 Administrative Fee 42
Section 9.8 Comply with Laws 42
Section 9.9 Insurance Required 42
Section 9.10 Condition of Collateral; No Liens 43
Section 9.11 Payment of Proceeds 43
Section 9.12 Pay Legal Fees and Expenses 44
Section 9.13 Records 44
Section 9.14 Delivery of Documents 00
Xxxxxxx 0.00 Xxxxxx Xxxxxx Contracts 44
Section 9.16 Name Changes; Location Changes 44
Section 9.17 Further Assurances 44
Section 9.18 Indemnification 45
Section 9.19 Annual Facility Fee 45
Section 9.20 Closing Fee 45
Section 9.21 Amendment Fee 46
Section 9.22 Year 2000 Technology 46
Section 9.23 Escrow 46
ARTICLE X
NEGATIVE COVENANTS
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Section 10.1 No Consolidation, Merger, Acquisition 47
Section 10.2 Disposition of Assets or Collateral 47
Section 10.3 Other Liens 47
Section 10.4 Other Liabilities 47
Section 10.5 Loans 47
Section 10.6 Guaranties 47
Section 10.7 Remove Property 47
Section 10.8 Transfers of Notes or Accounts Receivable 48
Section 10.9 Dividends 48
Section 10.10 Modification of Documents 48
Section 10.11 Change Business 48
Section 10.12 Settlements 48
Section 10.13 Change Location or Name 48
Section 10.14 Investments 48
Section 10.15 Tangible Net Worth 49
Section 10.16 Working Capital 49
ARTICLE XI
EVENTS OF DEFAULT
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Section 11.1 Failure to Pay 50
Section 11.2 Failure of Insurance 50
Section 11.3 Failure to Perform 50
Section 11.4 Cross Default; Default on Other Debt 50
Section 11.5 False Representation or Warranty 50
Section 11.6 Liquidation, Dissolution, Assignment to Creditors 51
iii
Section 11.7 Petition BV or Against Borrower or any of the
Guarantors 51
Section 11.8 Guarantor's Disclaimer of Liability 51
Section 11.9 Judgments; Levies 51
Section 11.10 Change in Condition 52
Section 11.11 Environmental Claim 52
Section 11.12 Failure to Notify 52
Section 11.13 Failure of Documentation 52
Section 11.14 Death 52
Section 11.15 Change in Management 52
Section 11.16 Non-Payment of Debts 52
Section 11.17 Federal Tax Lien 52
ARTICLE XII
REMEDIES
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Section 12.1 Acceleration; Proceed Against Collateral 53
Section 12.2 Set-off 54
Section 12.3 Cumulative Remedies; Waivers 54
Section 12.4 Other Property 55
Section 12.5 Costs and Expenses 55
Section 12.6 No Marshalling 55
Section 12.7 No Implied Waivers; Rights Cumulative 55
Section 12.8 Rescission of Rights of Borrower 55
ARTICLE XIII
MISCELLANEOUS RIGHTS AND DUTIES OF LENDER
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Section 13.1 Charges Against Credit Balances 57
Section 13.2 Collections; Modifications of Terms 57
Section 13.3 Notification of Account Debtors and Bailees of
Inventory 57
Section 13.4 Uniform Commercial Code 57
Section 13.5 Preservation of Collateral 57
Section 13.6 Lender's Right to Cure 58
Section 13.7 Test Verifications 58
Section 13.8 Power of Attorney 58
Section 13.9 Relief from Bankruptcy Stay 58
ARTICLE XIV
SECURITY INTEREST
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Section 14.1 Security Interest 60
Section 14.2 Continuation of Security Interest 60
Section 14.3 Cross Collateralization 60
Section 14.4 Construction 60
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ARTICLE XV
PROVISIONS OF GENERAL APPLICATION
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Section 15.1 Waivers 61
Section 15.2 Consents 61
Section 15.3 Survival 61
Section 15.4 Notices, Written; Effective Date 61
Section 15.5 Termination 62
Section 15.6 Amendments 62
Section 15.7 Binding on Successors 62
Section 15.8 Invalidity 62
Section 15.9 Expenses of Lender 63
Section 15.10 Section or Paragraph Headings 63
Section 15.11 Governing Law 63
Section 15.12 WAIVER OF JURY TRIAL 63
v
CREDIT AND SECURITY AGREEMENT
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THIS CREDIT AGREEMENT (hereinafter referred to as the
"Agreement") is made this 9th day of April 1999, by and between
CADAPULT GRAPHIC SYSTEMS, INC., a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and authorized to do business in New Jersey, having its
principal office located at 000 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx
Xxxxxx 00000 (hereinafter referred to as the "Borrower")
AND
SUMMIT COMMERCIAL/GIBRALTAR CORP., having its principal office
located at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter
referred to as the "Lender").
W I T N E S S E T H:
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WHEREAS, the Borrower has requested that the Lender provide
the Borrower with a revolving credit loan in the aggregate
principal amount of up to Six Million and 00/100 ($6,000,000.00)
Dollars (hereinafter referred to as the "Loan"), which will be
used, inter alia, for working capital and to satisfy certain
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existing bank loans and liens; and
WHEREAS, the Lender has agreed to make the Loan to the
Borrower subject to the terms and conditions hereafter set forth;
and
WHEREAS, the Borrower and the Lender now desire to enter into
this Agreement in order to provide for the terms and conditions
upon which the Lender will make the Loan to the Borrower.
NOW, THEREFORE, in consideration of these premises and the
mutual representations, covenants and agreements of the Borrower
and the Lender, each party binding itself and its successors and
assigns, does hereby promise, covenant and agree as follows:
ARTICLE I
DEFINITIONS
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Section 1.1 In General. For all purposes of this Agreement,
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except as otherwise expressly provided herein:
(a) accounting terms not otherwise defined herein shall
have the meanings assigned to them in accordance with accounting
principles and practices generally accepted in the United States of
America (hereinafter referred to as "GAAP") and, with respect to
the financial covenants contained in this Agreement, such
principles and practices shall be deemed to be the principles and
practices in effect on the Closing Date; and
(b) each reference in this Agreement to a particular
person shall be deemed to include a reference to such person's
successors and permitted assigns.
Section 1.2 Specific Terms Defined. The following terms
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(including both the singular and plurals thereof) shall have the
meanings respectively assigned to them directly or by reference
below in this Section 1.2;
"Account Debtor" means any "account debtor", as such term is
defined in Section 9-105(1)(a) of the UCC.
"Account" and "Accounts Receivable" mean all accounts as
defined in the UCC, and, in addition, any and all obligations of
any kind at any time due and/or owing to Borrower and all rights of
Borrower to receive payment or any other consideration (whether
classified under the Uniform Commercial Code of the State of New
Jersey or any other State as accounts, accounts receivable,
contract rights, chattel paper, general intangibles or otherwise)
including without limitation, invoices, contract rights, accounts
receivable, general intangibles, choses-in-action, notes, drafts,
acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to Borrower from any person,
firm, governmental authority, corporation or any other entity, all
security therefor, and all Borrower's rights to goods sold (whether
delivered, undelivered, in transit or returned), which may be
represented thereby, whether now existing or hereafter arising,
together with all proceeds and products of any and all of the
foregoing.
"Advance" shall mean any advance of monies or funds to the
Borrower by the Lender in connection with the Revolving Credit
Loan.
"Advance Date" means, in relation to any Advance, the day on
which such Advance is made or to be made to the Borrower.
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"Advance Limit" means the loans or advances which the Lender
may, in its sole and absolute discretion, from time to time when
requested by Borrower, make to Borrower, and which shall not in the
aggregate at any time outstanding exceed the lesser of Six Million
and 00/100 ($6,000,000.00) Dollars or the sum of the following:
A. Eighty-five (85%) percent of the face amount of the
Borrower's Eligible Accounts Receivable; and
B. The lesser of fifty (50%) percent of the value of
acceptable finished goods valued at the lower of cost or market or
eighty-five (85%) percent of the orderly liquidation value of the
Inventory; however, at no time will the Advances for Inventory
exceed a sub-limit of One Million and 00/100 ($1,000,000.00)
Dollars.
"Affiliate" means, in relation to any corporation, any person
that (directly or indirectly) controls or is controlled by or is
under common control with such corporation. For the purposes of
this definition, the term "control", as used with respect to any
person, shall mean the possession (directly or indirectly) of the
power to direct or to cause the direction of the management or the
policies of such person, whether through the ownership of shares of
any class in the capital of such person or by contract or
otherwise.
"Agreement" means this Credit and Security Agreement
(including all Schedules and Exhibits annexed hereto) as originally
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executed or, if amended, varied or supplemented from time to time,
as so amended, varied or supplemented.
"Available Credit" means the Commitment in existence from time
to time as reduced by the sum of (a) the Credit Balance and (b) all
other Obligations then due and payable or outstanding.
"Bank" means Summit Bank.
"Base" or "Base Rate" means the fluctuating rate of interest
that Summit Bank adopts on a daily basis as its official Base Rate.
The Base Rate is not tied to any external rate of interest or index
and does not necessarily reflect the lowest rate of interest
actually charged at any given time by the Bank to any particular
class or category of customers of the Bank. Any change in the Base
Rate shall be effective immediately when adopted by the Bank,
without notice to Borrower.
"Borrower" has the meaning set forth in the preamble.
"Borrowing Base Certificate" shall mean an advance request and
certificate duly executed by the Borrower in form and substance
satisfactory to the Lender.
3
"Business Day" means the day on which banks are open for the
purpose of conducting commercial banking business in the State of
New York.
"Capital Assets" means fixed assets, both tangible (such as
land, buildings, fixtures, machinery and equipment) and intangibles
(such as patents, copyrights, trademarks, franchises and good will;
provided, that Capital Assets shall not include any item
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customarily charged directly to expense or depreciated over a
useful life of 12 months or less in accordance with GAAP.
"Capital Expenditures" means expenditures or obligations
incurred for the acquisition of Capital Assets.
"Chattel Paper" shall mean any "chattel paper", as such term
is defined in Section 9-105(1)(b) of the UCC, whether now owned or
hereafter acquired by the Borrower.
"Closing Date" means the date herewith.
"Collateral" means all corporate assets including but not
limited to all of the following, whether now or hereafter existing
or created or now or hereafter acquired by Borrower:
(i) the Accounts Receivable;
(ii) the Inventory;
(iii) the Equipment;
(iv) any claims of Borrower against third-parties for
loss or damage to, or destruction of, any and all of the foregoing,
all guaranties, security and liens for payment of any Account
Receivable and documents of title, policies, certificates of
insurance, insurance proceeds, securities, chattel paper, and other
documents and instruments evidencing or pertaining thereto, and all
files, correspondence, computer programs, tapes, discs and related
data processing software owned by Borrower, or in which Borrower
has an interest which contain information identifying any one or
more of the items referred to in (i) through (iii) above, or (v)
through (vii) below; or any account debtor, showing the amounts
owed by each, payments thereon or otherwise necessary or helpful in
the realization thereon or the collection thereof;
(v) all insurance proceeds and any awards and payments,
including interest thereon, which may be made in respect of all or
any part of the Inventory or Equipment, as a result of damage to or
destruction of all or any part of the Inventory or Equipment, which
proceeds and awards are hereby assigned to the Lender, which is
hereby authorized to collect and receive the same and to give
receipts and acquittances therefor and to apply the same or any
part thereof as provided in this Agreement; and the Borrower hereby
4
agrees, upon request, to make, execute and deliver any and all
assignments and other instruments sufficient for the purposes of
assigning said proceeds and awards and payments to the Lender free,
clear and discharged of any encumbrances of any kind or nature
whatsoever;
(vi) any and all monies, securities, drafts, notes,
contract rights, leases, licenses, general intangibles, and other
Property of the Borrower, including customer lists, and all
proceeds and products thereof, now or hereafter held or received by
or in transit to the Lender from or for the Borrower, or which may
now or hereafter be in the possession of the Lender, or as to which
the Lender may now or hereafter control possession, by documents or
title or otherwise, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any and all deposits,
general or special, balances, sums, proceeds, and credits of the
Borrower, and all rights and remedies which the Borrower might
exercise with respect to any of the foregoing but for the execution
of this Agreement; and
(vii) all proceeds and products of, but not limited to,
without limitation, any Collateral referred to in clauses (i)
through (vi).
In addition, "Collateral" means the Mortgage given by
Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxx, to secure the Guaranty.
"Commitment" means the amount set forth herein as the Lender's
commitment to make Advances to the Borrower and issue Letters of
Credit as the same may be reduced from time to time.
"Contracts" means all contracts, licenses, instruments,
undertakings, documents or other agreements in or under which the
Borrower may now or hereafter have any right, title or interest
(other than rights evidenced by Chattel Paper or Instruments),
including, without limitation, (i) any claim arising thereunder
from misrepresentation or breach of warranty and (ii) all such
agreements which pertain to the lease, sale, construction, design,
manufacture or other disposition of any Equipment, fixtures, real
property or any interest in real property as any of the same may
from time to time be amended or supplemented (with the prior
written consent of the Lender in the event any such amendments are
out of the Borrower's ordinary course of business), other than such
contracts, instruments, undertakings, documents or other agreements
which specifically prohibit their assignment as security, provided,
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that notwithstanding any such prohibition, such contracts,
instruments, undertakings, documents or other agreements shall be
deemed to be contracts to the extent that such prohibition is
inconsistent with the provisions of Section 9-318 of the UCC.
"Copyrights" means all United States copyrights, registrations and
applications therefor of the Borrower, and any and all (i)
5
renewals and extensions thereof, (ii) income, royalties, damages
and payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments for
past or future infringements or misappropriation thereof, (iii)
rights to xxx for past, present and future infringements or
misappropriation thereof, and (iv) all other rights corresponding
thereto, in each instance, whether now owned or hereafter acquired
by the Borrower.
"Credit Balance" means, at any time, the sum of aggregate
principal Advances then outstanding.
"Credit Period" means the definition set forth in Section
2.1(a).
"Current Assets" shall mean those assets of the Borrower that
are treated as current assets in accordance with Generally Accepted
Accounting Principles.
"Current Liabilities" shall mean those liabilities of the
Borrower that are treated as current liabilities in accordance with
Generally Accepted Accounting Principles, including, but not
limited to, (i) all obligations payable on demand or within one (1)
year after the date on which the determination is made, and (ii)
final maturities and sinking fund payments required to be made
within one (1) year after the date on which the determination is
made, but excluding all such liabilities or obligations which are
renewable or extendable at the option of the Borrower to a date
more than one (1) year from the date of determination.
"Debt" shall mean with respect to any Person the aggregate sum
of the following items as such items appear on the balance sheet of
said Person: (i) the unpaid principal balance of all indebtedness
or liability for money borrowed or owed to any Person from time to
time (including any renewals, extensions and refundings thereof),
whether or not the indebtedness was heretofore or hereafter
created, issued, incurred, assumed or guarantied, as determined in
accordance with Generally Accepted Accounting Principles; (ii) the
unpaid principal balance of all indebtedness or liability for the
deferred purchase price of property or services incurred (including
trade obligations); (iii) all obligations as lessee under leases
which have been or should be, in accordance with Generally Accepted
Accounting Principles, recorded as capitalized lease liabilities,
(iv) all Current Liabilities in respect of unfunded vested benefits
under any Plan covered by Title IV of ERISA, (v) all obligations,
contingent or otherwise relative to the face amount of all letters
of credit issued for said Person's account, whether or not drawn;
(vi) all obligations arising under banker's acceptance facilities
issued for the account of said Person, (vii) all guarantees,
endorsements and other contingent obligations to purchase, to
provide funds for payments, to supply funds to invest in any Person
or otherwise to assure a creditor against loss, and (viii) all
6
obligations secured by any mortgage, lien, pledge, or security
interest or other charge or encumbrance on property, whether or not
the obligations have been assumed.
"Default" shall mean any of the events of default as defined
and described in this Agreement, whether or not any requirement for
the giving of notice, passing of time, or both, or the happening of
any other condition, has been satisfied.
"Default Amount" means (i) the aggregate amount of all
Obligations for principal and interest, including late charges
thereon, and all other sums which are then due and unpaid; and (ii)
an amount equal to the aggregate amount of all principal remaining
to be repaid on all Obligations; and (iii) interest on the
foregoing sums, at the Default Rate, from the occurrence of an
Event of Default until paid in full.
"Default Rate" shall mean an interest rate per annum which is
equal to two (2%) percent over and above the rate of interest set
forth in the Loan Documents.
"Distribution" means the declaration or payment of any
dividend on or in respect of any shares of any class of capital
stock of the Borrower, other than dividends payable solely in the
shares of common stock of the Borrower, directly or indirectly
through a Subsidiary or otherwise; the return of capital by the
Borrower of its shareholders as such; or any other distribution on
or in respect of any shares of any class of capital stock of the
Borrower.
"EBIT" shall mean the sum of the Borrower's earnings before
interest and taxes; as demonstrated by the financial statements
submitted to the Lender in accordance with the terms and conditions
of this Agreement.
"Eligible Accounts Receivable" means the Accounts Receivable
as to which the Borrower has furnished to the Lender information
adequate to identify the same, at such times and in such form as
has been or, from time to time may be, requested by the Lender,
which meet all of the following criteria on the origination date of
the said accounts and continuing thereafter until collected, and
which is in all other respects acceptable to the Lender:
(i) The Borrower is the sole owner of the Accounts
Receivable and has not sold, assigned, mortgaged, or hypothecated,
or released from the Lender's Security Interest, all or any portion
thereof, nor are they subject to any claim, lien or security
interest of any persons or entities, including without limitation
the United States, or any agency or instrumentality thereof;
(ii) They shall be valid and legally enforceable, owing
to the Borrower for the performance of services or the sale of
7
goods arising in the ordinary course of business for which the
Borrower has delivered or, at the time of origination of the said
accounts, if required by the Lender, will deliver to the Lender,
invoices, xxxxxxxx and shipping documents and other documents
evidencing the obligation of the Borrower's customer to pay the
Accounts Receivable;
(iii) No financing statement covering any Account
Receivable or its proceeds, other than those to the Lender, is on
file in any public office, and neither the Borrower nor the Lender
have received any notice of any proposed acquisition, of any
account receivable security interest therein;
(iv) The original date of the invoice for the Account
Receivable is less than ninety (90) days prior to the date the
amount of the Eligible Accounts Receivable is being determined;
(v) They are not subject to any offsets, credits
allowances or adjustments due the account debtor except usual and
customary prompt payment discount, nor has the account debtor
returned the goods or indicated any dispute or complaint concerning
them;
(vi) The Borrower has not received any notice, nor has it
any knowledge of any facts, which adversely affects the credit of
the account debtor; and
(vii) The Lender has not notified the Borrower that
either the Account Receivable or the account debtor is not
qualified.
Notwithstanding the above the following will be considered
ineligible receivables:
(i) All known foreign accounts receivable;
(ii) All Account Debtor customer's current balances where
50% or more of the particular customer account balance is over the
defined eligibility terms;
(iii) All Contra, consigned or guaranteed sales;
(iv) That portion of any customer account receivable
which exceeds 20% of all the Account Debtor's total accounts
receivable;
(v) All "Cash" sales, freight receivables, Government
accounts, miscellaneous accounts due from related entities,
salesmen, consignment sales, xxxx and hold, and miscellaneous debit
entries, COD, Finance Charges, chargebacks; and
8
(vi) All other non credit-worthy customer accounts which
are not otherwise ineligible.
"Eligible Inventory" means the Inventory as to which the
Borrower has furnished to the Lender information adequate to
identify the same at such times and in such form as has been, or
from time to time may be, requested by the Lender, which meets all
of the following criteria on the date of any advances under this
Agreement and while any Obligations (as hereinafter defined are
outstanding, and which is in all other respects, acceptable to the
Lender:
(i) The Borrower is the sole owner of the Inventory,
none of the Inventory is being held by the Borrower on a
consignment basis, and the Borrower has not sold, assigned,
transferred, mortgaged or hypothecated, nor released from the
Lender's security interest, all or any portion thereof, nor are
they subject to any claim or security interest of any persons or
entities, including without limitation the United States;
(ii) No financing statement covering any of the Inventory
or its proceeds, is on file in any public office, and neither the
Borrower nor the Lender has received any notice of any proposed
acquisition of any inventory security interest herein; and
(iii) If any of the goods are represented or covered by
documents of title, instruments or chattel paper, the Borrower is
the owner of all such documents, instruments and paper, and none of
it has been sold or transferred nor has any security interest in
all or any portion thereof been granted to any person.
(iv) The Inventory shall be salable (in the ordinary
course of business).
(v) The Inventory is finished goods.
Notwithstanding the above, the following will be considered
ineligible Inventory:
(i) Slow moving and/or obsolete Inventory.
(ii) Any Inventory located off premises without receipt
of an acceptable landlord's/mortgagee's waiver.
(iii) Any other Inventory which the Lender in its
reasonable opinion deems ineligible.
"Environmental Law" or "Environmental Laws" shall mean all
federal, state and local laws, statutes, ordinances and regulations
now or hereafter in effect, and in each case as amended or
supplemented from time to time, and any judicial or administrative
interpretation thereof, including any judicial or administrative
9
order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include but are not
limited to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended (42 U.S.C. Sec. 9601 et seq.)
("CERCLA"); the Hazardous Material Transportation Act, as amended
(49 U.S.C. Sec. 180 et seq.); the Federal Insecticide, Fungicide,
and Rodenticide Act, as amended (7 U.S.C. Sec. 136 et seq.); the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sec.
6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended
(42 U.S.C. Sec. 7401 et seq.); the Clean Air Act, as amended (42
U.S.C. Sec. 740 et seq.); the Federal Pollution Control Act, as
amended (33 U.S.C. Sec. 1251 et seq.); the Occupational Safety and
Health Act, as amended (29 U.S.C. Sec. 651 et seq.); the Safe
Drinking Water Act, as amended (42 U.S.C. Sec. 300f et seq.); the
Food, Drug and Cosmetic Act, as amended (21 U.S.C. Sec. 301 et
seq.); the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582,
102 Stat. 2950 (1988), and their state and local counterparts or
equivalents and any transfer of ownership, notification or approval
statutes such as the New Jersey Industrial Site Recovery Act (N.J.
Stat. Xxx. Sec. 13:lK-6 et seq.) ("ISRA"); the New Jersey Leaking
Underground Storage Tank Act (N.J. Stat. Xxx Sec. 58:lOa-21 et
seq.) ("LUST"); and the Spill Compensation and Control Act (N.J.
Stat. Xxx. Sec. 58:10-23.11 et seq.).
"Environmental Liabilities and Costs" shall mean, as to any
Person, all liabilities obligations, responsibilities, Remedial
Actions, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and
costs of investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand
by any other Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute,
including any Environmental Law, permit, order or agreement with
any Governmental Authority or other Person, and which arise from
any environmental, health or safety conditions, or a Release or
conditions that are reasonably likely to result in a Release, and
result from the past, present or future operations of such Person
or any of its Subsidiaries.
"Environmental Lien" shall mean any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Equipment" means in addition to the definition thereof
contained in the UCC, all equipment, machinery, furniture,
fixtures, and all other tangible assets, and all replacements,
repairs, modifications, alterations, additions, controls and
10
operating accessories thereof, all substitutions and replacements
therefor, and all accessions and additions thereto and all proceeds
and products of the foregoing now owned or hereafter acquired by
the Borrower.
"Event of Default" means any event of default described in
this Agreement.
"Extension of Credit" means all credit extended to the
Borrower pursuant to the Revolving Credit Loan and Letters of
Credit issued and processed on behalf of the Borrower.
"Financing Statements" means the Uniform Commercial Code UCC-1
Financing Statements to be filed with applicable governmental
authorities of each State where the Collateral is or may hereafter
be located pursuant to which the bank shall perfect its security
interest in the Collateral.
"Fiscal Quarter" shall mean the following three (3) month
periods of each Fiscal Year (or such other three month periods as
agreed upon by the Borrower and the Lender):
January 1 - March 31
April 1 - June 30
July 1 - September 30
October 1 - December 31
"Fiscal Year" shall mean that twelve (12) month period (or
such other twelve (12) month period as agreed upon by the Borrower
and the Lender) commencing on January 1 and ending on December 31
of each year.
"General Intangibles" means any "general intangibles," as
such term is defined in Section 9-106 of the UCC, now owned or
hereafter acquired by the Borrower and, in any event, shall
include, without limitation, all rights, interest, choses in
action, causes of actions, claims and all other intangible property
of the Borrower of every kind and nature, in each instance whether
now owned or hereafter acquired by the Borrower, including, without
limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever
(other than Accounts Receivable); all trademarks, patents, trade
secrets, licenses, copyrights, goodwill, inventions (whether
patented or patentable or not), designs, registrations, permits,
franchises, proprietary or confidential information, technical
information, procedures and designs; all knowledge, know-how,
skill, expertise and experience relating to the business conducted
by the Borrower; all computer programs, software, data bases, data,
processes, models, drawings, printouts and other computer
materials, customer lists, credit files, and supplier contracts,
firm sale orders, rights under license and franchise agreements;
all interests in partnerships and joint ventures; all tax refunds
11
and tax refund claims; all right, title and interest under leases,
subleases, licenses and concessions and other agreements relating
to personal property; all payment due or made to the Borrower in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any property by any Person or Governmental
Authority; all deposit accounts (general or special) with any bank
or other financial institution; all credits with and other claims
against third parties (including carriers and shippers) (other than
Accounts Receivable); all rights to indemnification; all
reversionary interests in pension and profit sharing plans and
reversionary, beneficial and residual interests in trusts; all
proceeds of insurance of which the Borrower is the beneficiary; all
right, title and interest which the Borrower may now or hereafter
have or under any other Contracts or contract right, now owned or
hereafter acquired by the Borrower; and all letters of credit,
guaranties, liens, security interests and other security held by or
granted to the Borrower; and all other intangible property, whether
or not similar to the foregoing, in each instance, however and
wherever arising.
"Generally Accepted Accounting Principles" shall mean
generally accepted principles and practices for financial
statements as developed and modified by the American Institute of
Certified Public Accountants, the Financial Accounting Standards
Board, the Securities and Exchange Commission, the stock exchanges
and industry practices and custom, applied on a consistent basis.
"GAAP" means Generally Accepted Accounting Principles.
"Governmental Authority" or "Governmental Authorities" shall
mean any federal, state, county or municipal governmental agency,
board, commission, officer, official or entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government whose consent or approval
is required as a prerequisite to (i) the continued uninterrupted
operation of the Borrower's business operations, or (ii) the
performance of any act or obligation or the observance of any
agreement or condition of the Borrower under this Agreement or the
other Loan Documents.
"Guaranty" means the guaranty given by Xxxxxxx Xxxxx, for the
benefit of the Lender in respect of the Borrower's obligations
hereunder.
"Guarantor" means Xxxxxxx Xxxxx.
"Indebtedness" means all of the obligations of the Borrower
which, in accordance with GAAP, should be classified upon the
E3orrower's balance sheet as liabilities, or to which reference
should be made by footnotes thereto, including without limitation,
in any event and whether or not so classified:
12
(i) all debt and similar monetary obligations of the
Borrower, whether direct or indirect, including without limitation
the Subordinated Debt;
(ii) all obligations of the Borrower arising or incurred
under or in respect of any guaranties (whether direct or indirect)
by the Borrower of the indebtedness, obligations or liabilities of
any other person; and
(iii) all obligations of the Borrower arising or incurred
under or in respect of any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in Property owned by such
person, even though such person has not assumed or become liable
for the payment of such obligations.
"Instrument" means any "instrument," as such term is defined
in Section 9-105(l)(i) of the UCC, now owned or hereafter acquired
by the Borrower, other than instruments that constitute, or are a
part of a group of writings that constitute, Chattel Paper.
"Inventory" means any "inventory," as such term is defined in
the UCC, now owned or hereafter acquired by the Borrower and, in
any event, shall include, without limitation, all inventory,
merchandise, goods and other tangible personal property now owned
or hereafter acquired by the Borrower (wherever located, whether in
the possession of the Borrower or of a bailee or other person for
sale, storage, transit, processing, packaging, delivery, shipping,
use or otherwise and whether consisting of whole goods, spare
parts, components, supplies, materials, or consigned, returned or
repossessed goods) which are held for sale or lease or to be
furnished (or have been furnished) under any contract of service or
which constitute raw materials, work in process or materials used
or consumed in the Borrower's businesses or in the processing,
packaging or shipping of same and all finished goods.
"Lender" has the meaning set forth in the Preamble.
"Letter of Credit" shall mean an undertaking by the Bank to
pay the beneficiary of a Letter of Credit a certain sum or sums of
money on behalf of the Borrower provided the beneficiary delivers
evidence to the Lender that the terms and conditions of the Letter
of Credit have been fulfilled.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority, or
other security agreement or preferential arrangement, charge, or
encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any
13
financing statement under the UCC or comparable law of any
jurisdiction to evidence any of the foregoing).
"Loan" shall have the meaning set forth in the first Recital
of this Agreement.
"Loan Documents" shall mean any and all agreements, documents,
certificates and instruments executed by the Borrower or any other
Person or delivered by the Borrower to the Lender pursuant to and
in connection with the Loan and this Agreement, including, without
limitation, the Guaranty and the Financing Statements.
"Maturity Date" means April 30, 2001.
"Mortgage" means second mortgage, with respect to certain
Property located at 0 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxx of Bergen,
State of New Jersey, by Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxx,
subject to a first mortgage not to exceed $378,000.00.
"Obligation" means any one of the Obligations.
"Obligations" means, collectively, all of the indebtedness,
obligations, liabilities, and agreements of every kind and nature
of the Borrower to or with the Lender, or to or with any affiliate
of the Lender, or of any guarantor of the Borrower's indebtedness,
obligations, liabilities and agreements to or with the Lender, or
to or with any affiliate of the Lender, now existing or hereafter
arising, and now or hereafter contemplated, pursuant to this
Agreement, the Loan Documents or otherwise, whether in the form of
refinancing, letters of credit, bankers acceptances, guaranties,
loans, interest, charges, expenses or otherwise, direct or
indirect, (including without limitation, any participants or
interest of the Lender, or of an affiliate of the Lender in any
obligation of the Borrower to others), acquired outright,
conditionally or as collateral security from another, absolute or
contingent, joint or several, liquidated or unliquidated, secured
or unsecured, arising by operation of law or otherwise, including
without limitation any future advances, renewals, extensions or
changes in form of, or substitutions for, any of said indebtedness,
obligations or liabilities, the other sums and charges to be paid
to the Lender pursuant to this Agreement or any of the Loan
Documents to which the Borrower is a party, and all interest and
late charges on any of the foregoing.
"Person" shall include an individual, a company, a
corporation, an association, a partnership, a joint venture, an
unincorporated trade or business enterprise, a trust, an estate, or
a government or an agency, instrumentality or official thereof.
"Proceeds" shall have the meaning assigned to it under the UCC
and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty
14
payable to the Borrower from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Borrower from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency or any other Person
(whether or not acting under color of Governmental Authority) and
(iii) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Restricted Investment" means any investment in cash or by
delivery of property of any Person, whether by acquisition of
stock, Indebtedness or other obligation or security, or by loan
advance or capital contribution, or otherwise, or by acquisition of
any property.
"Subordinated Debt" means, at any particular time, all of the
Indebtedness of the Borrower that shall be expressly subordinated
upon written terms and conditions, satisfactory to the Lender, in
right of payment to the prior payment in full of all of the
Obligations.
"Subsidiary" or "Subsidiaries" shall mean with respect to any
Person (i) a corporation a majority of whose capital stock with
voting power, under ordinary circumstances, to elect directors is
at the time, directly or indirectly, owned by such Person, by such
Person and one or more Subsidiaries of such Person or by one or
more Subsidiaries of such Person, or (ii) any other Person (other
than a corporation) in which such Persons and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has at least a majority ownership interest.
"Tangible Capital Funds" shall mean the amount which is
equivalent to the sum of (i) the Borrower's subordinated debt plus
(ii) tangible shareholder's equity, as determined by Generally
Accepted Accounting Principles.
"Tangible Net Worth" means as of the time of any determination
thereof, the difference between (A) the sum of (i) the par value
(or value stated on the books of the Borrower) of the capital stock
of all classes of the Borrower, plus (or minus in the case of a
deficit) (ii) the amount of the surplus, whether capital or earned,
of the Borrower and its subsidiaries, plus (iii) Subordinated Debt
less (B) the sum of treasury stock, discount and expense, goodwill,
trademarks, trade names, patents, deferred charges, leasehold
improvements and other intangible assets and any writeup of the
value of any assets, all determined in accordance with generally
accepted accounting principles, applied on a consistent basis.
"UCC" shall mean the Uniform Commercial Code as enacted in New
Jersey (or any successor legislation thereto), as the same may be
amended from time to time, and the state counterparts as may be
15
enacted in such states or jurisdictions where any of the Collateral
is located or held.
"Working Capital" shall mean as of the time of any
determination thereof, the amount determined in accordance with
Generally Accepted Accounting Principles, by which the Current
Assets of the Borrower exceed the Current Liabilities of the
Borrower. Notwithstanding the above, the Working Capital
determination shall exclude all outstanding indebtedness to the
Lender under the Loan.
Section 1.3 Rules of Interpretation and Construction. In
----------------------------------------
this Agreement unless the context otherwise requires:
(i) Articles and Sections mentioned by number only are the
respective Articles and Sections of this Agreement as so numbered;
(ii) Words importing a particular gender shall mean and
include the other gender and words importing the singular number
mean and include the plural number and vice versa;
----------
(iii) Words importing persons shall mean and include firms,
associations, partnerships (including limited partnerships),
societies, trusts, corporations or other legal entities, including
public or governmental bodies, as well as natural persons;
(iv) Each reference in this Agreement to a particular person
shall be deemed to include a reference to such person's successors
and permitted assigns.
(v) Any headings preceding the texts of the several Articles
and Sections of this Agreement, and any table of contents or
marginal notes appended to copies hereof, shall be solely for
convenience of reference and shall not constitute a part of this
Agreement, nor shall they affect its meaning, construction or
effect.
(vi) If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render
unenforceable any of the remaining provisions thereof, unless not
invalidating or rendering unenforceable the remaining provisions
shall be inequitable;
(vii) The terms "herein", "hereunder", "hereby", "hereto",
and any similar terms as used in this Agreement refer to this
Agreement; the term "heretofore: means before the date of execution
of this Agreement; and the term "hereafter" means after the date of
execution of this Agreement;
16
(viii) This Agreement and all matters relating hereto shall be
governed by and construed and interpreted in accordance with the
laws of the State of New York,
(ix) If any clause, provision or section of this Agreement
shall be determined to be apparently contrary to or conflicting
with any other clause, provision or section of this Agreement, then
the clause, provision or section containing the more specific
provisions shall control and govern with respect to such apparent
conflict; and
(x) Unless otherwise specified, (i) all accounting terms used
herein or in any Loan Document shall be interpreted, (ii) all
accounting determinations and computations hereunder or thereunder
shall be made, and (iii) all financial statements required to be
delivered hereunder or thereunder shall be prepared in accordance
with Generally Accepted Accounting Principles; and
(xi) The word "and" when used from time to time herein shall
mean "or" or "and/or" if such meaning is expansive of the rights or
interests of the Lender in the given context.
17
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
-----------------------------
Section 2.1 Commitment.
----------
(a) Commitment to Lend Under Revolving Loan. Subject to
---------------------------------------
the terms and conditions set forth in this Agreement, the Lender
agrees to make advances to the Borrower and the Borrower may
borrow, repay, and reborrow from time to time between the date of
this agreement and the Maturity Date (the "Credit Period") upon
notice by the Borrower to the Lender given in accordance with
Section 2.2 hereof, such sums as requested by the Borrower up to a
maximum aggregate principal amount outstanding (after giving effect
to all amounts requested) at one time equal to the Advance Limit.
Each request for an Advance hereunder shall constitute a
representation by the Borrower that the conditions set forth in
this Agreement have been satisfied on the date of such request.
(b) Overline and Overformula Rights. Notwithstanding
-------------------------------
any other provision herein, the Lender may, from time to time, in
its sole discretion, permit the outstanding amounts of any
components of, or the aggregate outstanding amounts of, the loans,
advances or other financial accommodations to exceed the formulas
or limitations set forth in this Agreement. In any such event, and
without limiting the rights of Lender to demand payment of the Loan
in whole or in part at any time and from time to time, Borrower
shall immediately repay to Lender, and/or furnish cash collateral
to Lender for, such portion of the outstanding loans, advances or
other financial accommodations which equals the amount(s) by which
the formulas or the limitations set forth herein have been
exceeded. If the outstanding amount of the loans, advances or
other financial accommodations shall exceed the Advance Limit at
any time, such excess shall be deemed secured by the Collateral (as
hereinafter defined) and shall be subject to the terms of this
Agreement.
Section 2.2 Making the Advances Under Revolving Credit Loan.
-----------------------------------------------
Subject to all of the applicable terms and conditions of this
Agreement, Advances shall be made by the Lender to the Borrower at
such times and in such amounts, as shall be requested by the
Borrower in compliance with this Section 2.2.
(a) Advances shall be in integral multiples of
$10,000.00.
(b) In no event shall the sum of (i) the amount of any
and all Advances requested by the Borrower, and (ii) the Credit
Balance outstanding on the requested Advance Date, exceed the
Available Credit on such Advance Date.
18
(c) Each Advance shall be made on notice given by the
Borrower to the Lender not later than 11:00 a.m./ on the proposed
Advance Date. Each such notice of an Advance (a "Notice of
Advance") shall he by telephone or facsimile, in each case
confirmed immediately in a signed writing by the Borrower
specifying therein (i) the requested Advance Date and (ii) the
amount of such Advance.
(d) A Notice of Advance shall be irrevocable and binding
on the Borrower and, if such advance is not taken on the date
specified for such Advance in such Notice of Advance, the Borrower
shall indemnify the Lender against any loss or expense incurred by
Lender as a result of such failure including without limitation,
any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Lender to
fund or maintain an Advance to be made by such Lender.
(e) If the Commitment has not terminated in full prior
to a requested Advance Date, and if all of the applicable
conditions precedent specified in this Agreement are satisfied on
or as of such Advance Date, then Lender shall, on the Advance Date
make available for the Borrower's account and in immediately
available funds, an amount equal to the requested Advance.
(f) Without limiting any other rights and remedies of
Lender hereunder or under the other Loan Documents, all loans,
advances or financial accommodations made or otherwise available to
Borrower shall he subject to Lender's continuing right, in its sole
discretion, to withhold from Borrower's availability under the
Loan, a reserve, and to increase and decrease such reserve from
time to time, if and to the extent that, in Lender's sole judgment,
such reserve is necessary to protect the interests of Lender
against possible non-payment of Accounts, for any reason, by
Account Debtors, possible non-payment by Borrower of any
Indebtedness owed to, or liens held by, third parties, or to
protect the interests of Lender against the possible adverse effect
of any state of facts which does or would, with notice or passage
of time or both, constitute an Event of Default hereunder.
Section 2.3 The Loan Accounts. The Lender will open and
-----------------
maintain a loan account (a "Loan Account") on its books in the name
of the Borrower with respect to the Lender's Advances. Each
Advance will be debited, and each payment or prepayment on account
thereof will be credited and recorded in the Loan Account. The
Lender shall render to the Borrower on or before the 15th Business
Day of each month a statement of the Loan Account as of the last
day of the prior month, which statement shall be considered correct
and accepted by the Borrower and binding upon the Borrower unless
the Lender is notified to the contrary within 30 days from the
receipt of such statement; provided, however, that the failure of
--------
the Lender to render any such statement in a timely fashion shall
not impair the validity or binding nature of the Loan Account.
19
Section 2.4 Interest Rate. The Loan shall hear interest
-------------
during each calendar month at a fluctuating interest rate per annum
for all amounts equal at all times to two (2%) percentage points
over and above the Bank's Base Rate of Interest in effect from time
to time, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in such Base Rate of
Interest, with notice to the Borrower. Interest shall be
calculated on a daily basis upon the unpaid balance with each day
representing 1/360th of a year.
Section 2.5 Payment of Interest. Interest on the Loan shall
-------------------
be charged to any Loan Account maintained with the Lender.
Section 2.6 Interest on 0verdue Payments. Each amount
----------------------------
payable by the Borrower to the Lender under this Agreement that is
not paid when due (whether at the Maturity Date, by acceleration or
otherwise) and to the extent permitted by applicable law shall bear
interest, from the date on which such amount shall have first
become due and payable by the Borrower to the date on which such
amount shall be paid by the Borrower (whether before or after
judgment), at the Default Rate. The unpaid interest accrued on any
overdue amount in accordance with this Section shall become and be
absolutely due and payable by the Borrower to the Lender on written
demand by the Lender at any time. Interest on each overdue amount
will continue to accrue and will (to the extent permitted by
applicable law) be compounded monthly until the obligations of the
Borrower in respect of the payment of such overdue amounts are
discharged (whether before or after judgment).
Borrower acknowledges that: (i) such additional rate is a
material inducement to Lender to make the Loan; (ii) Lender would
not have made the Loan in the absence of the agreement of Borrower
to pay such Default Rate; (iii) such additional rate represents
compensation for increased risk to Lender that the Loan will not be
repaid; and (iv) such rate is not a penalty and represents a
reasonable estimate of (a) the cost to Lender in allocating its
resources (both personnel and financial) to the ongoing review,
monitoring, administration and collection of the Loan and (b)
compensation to Lender for losses that are difficult to ascertain.
Section 2.7 Limitation on Interest. No provision of this
----------------------
Agreement shall require the payment or permit the collection of
interest in excess of the rate then permitted by applicable law,
provided, that if any provision is so limited by such applicable
--------
law, the interest shall be the maximum amount permitted thereunder.
Section 2.8 Advances Under Loan; Promises to Pay.
------------------------------------
(a) The entire principal sum of the Advances under the
Loan, if not sooner paid, shall become and be absolutely due and
payable by the Borrower to the Lender on the Maturity Date. The
Borrower hereby absolutely and unconditionally promises to pay to
20
the Lender the Credit Balance, all Obligations and all interest,
costs and expenses thereon when such amounts become due, whether on
the scheduled Maturity Date or earlier on account of acceleration
as provided in this Agreement or otherwise.
(b) Subject always to the other terms and conditions
hereof, the Borrower will be entitled to reborrow under the Loan
prior to the Maturity Date all or any part of the principal of the
Advances paid provided that the aggregate amount of all new
Advances does not exceed the then existing Available Credit.
(c) Any partial payment of the Obligations of the
Borrower to the Lender shall be applied by the Lender (i) first, to
the payment of all of the interest due and payable on the
obligations at the time of such partial payment, (ii) then, to the
payment of all (if any) other amounts (except principal) due and
payable under this Agreement at such time, and (iii) finally, to
the payment of the unpaid principal of the Obligations.
Section 2.9 Use of Proceeds. The proceeds of the Advances
---------------
will be used by the Borrower to purchase inventory, to provide
working capital to the Borrower and to satisfy certain existing
bank loans and liens. No part of the proceeds of any of the
Advances shall be assignable without the prior written consent of
the Lender and any attempt to make such assignment without such
consent shall be void. No part of the proceeds of any of the
Advances will be used (directly or indirectly) (i) to purchase or
carry, or to extend credit to any person or persons for the purpose
of purchasing or carrying, any margin stock within the meaning of
Regulation U or Regulation X of the Board or Governors of the
Federal Reserve System and (ii) no Advance shall be secured
directly or indirectly by any type or kind of margin stock, as so
defined.
Section 2.10 Change in Laws.
--------------
If any change in any law or regulation or in the
interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof, or
compliance by the Lender with any request or directive (whether or
not having the force of law) of any such authority, shall impose,
modify, deem applicable or result in the application of, any
capital maintenance, capital ratio or similar requirement against
loan commitments made by the Lender and the result thereof shall be
to impose upon the Lender or increase any capital requirement
applicable as a result of the making or maintenance of the
Commitment (which imposition of or increase in capital requirements
may be determined by the Lender's reasonable allocation of the
aggregate of such capital impositions or increases) then, upon
demand by the Lender, the Borrower shall immediately pay to the
Lender from time to time as specified by the Lender additional
commitment fees which shall be sufficient to compensate the Lender
21
for such imposition of or increases in capital requirements from
the date of such change, together with interest on each such amount
from the date demanded until payment in full thereof at the rate
provided in Section 2.4 of this Agreement. Upon the occurrence of
any event referred to above, a certificate setting forth in
reasonable detail the amounts necessary to compensate the Lender as
a result of an imposition of or increase in capital requirements
submitted by the Lender to the Borrower shall be conclusive, absent
manifest error or bad faith, as to the amount thereof. For
purposes of this Section, in calculating the amount necessary to
compensate the Lender for any imposition of or increase in capital
requirements, the Lender shall be deemed to be entitled to a rate
of return on capital (after federal, state and local taxes) of
fifteen percent per annum.
Section 2.11 Termination.
-----------
(a) The Borrower shall have the right, in its sole
discretion, to pay and prepay in full, but not in part, the
outstanding obligations and to terminate this Agreement in
accordance with the terms and provisions of this Agreement;
provided that (i) Borrower provides Lender with sixty (60) days
-------- ----
prior written notice of its intent to terminate this Agreement (the
sixty (60) days following such written notice being hereinafter
referred to as the "Termination Date"); (ii) the Borrower complies
with the other provisions of this Agreement, and (iii) the Borrower
pays to Lender the amount of all principal, interest, charges, full
amount of all open letters of credit, fees and expenses owed to
Lender by the Borrower under this Agreement, or otherwise,
including but not limited to the Early Termination Fee as set forth
in paragraph (c) below.
(b) If Lender terminates this Agreement upon the
occurrence of a Default or any Event of Default, Borrower shall pay
to Lender, upon the effective date of such termination all
principal, interest, charges, full amount of all open letters of
credit, fees and expenses owed to Lender by the Borrower under this
Agreement, or otherwise, including but not limited to the Early
Termination Fee as set forth in paragraph (c) below.
(c) The Early Termination Fee shall be:
(i) Two (2%) percent of the Loan if terminated
prior to the first anniversary of the date of closing.
(ii) One (1%) percent of the Loan if terminated
prior to any anniversary of the date of any renewal term
thereafter.
Said Early Termination Fee has been established by the parties
in view of the impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties
22
as to a reasonable calculation of Lender's lost profits as a result
thereof. The Early Termination Fee shall be deemed included in the
obligations.
Notwithstanding the above, no Early Termination Fee shall be
due and payable if the Borrower recast the Loan with Summit Bank.
Section 2.12 Security for the Loan. As security for the due
---------------------
and punctual payment and performance of the Obligations, the
Borrower shall execute and deliver, or cause to be executed and
delivered to the Lender on the Closing Date the following Loan
Documents:
(i) This Agreement;
(ii) The Financing Statements;
(iii) Guaranty of Xxxxxxx Xxxxx;
(iv) The Mortgage;
(v) Such other documents as the Lender may have
reasonably required.
Section 2.13 Extension of Maturity Date.
--------------------------
The Maturity Date of the Loan shall be extended for a periods
of one (1) year unless either party to this Agreement gives notice
to the other of its intent to terminate at the Maturity Date or any
subsequent Maturity Date. Such notice must be in writing and
presented to the other party sixty (60) days prior to the Maturity
Date or any subsequent Maturity Date. All terms and conditions of
this Agreement and the Loan Documents shall remain in full force
and effect for each additional one (1) year period of the Loan.
Each subsequent Maturity Date will be extended pursuant to the
provisions of this Section.
Section 2.14 Cash Collateral Account.
-----------------------
Upon the Lender's request, Borrower, forthwith upon receipt of
all checks, drafts, cash and other remittances (herein called
proceeds) in part or full payment for any of the collateral, will
deposit the proceeds in a Cash Collateral Account maintained with
the Bank over which the Lender alone shall have power of
withdrawal. Credit for proceeds deposited in the Cash Collateral
Account shall be conditional upon final payment of the deposited
item. Two business days after receipt the Lender will apply the
whole or any part of the Collected funds on deposit in the Cash
Collateral Account against the principal or interest of the notes
and the other charges specified in this Agreement, the order and
method of such application to be in the discretion of the Lender.
Any part of the collected balance in the Cash Collateral Account
which the Lender elects not to so apply may be paid over by the
Lender to the Borrower.
23
ARTICLE III
LETTERS OF CREDIT
-----------------
Section 3.1 Commitment and Issuance of Letters of Credit.
--------------------------------------------
(a) Subject to the terms and conditions set forth in
this Agreement, the Lender through the Bank shall issue and process
Letters of Credit on behalf of the Borrower in amounts not to
exceed, in the aggregate, the sum of Two Hundred Fifty Thousand and
00/100 ($250,000.00) Dollars at any one time.
(b) The Borrower may utilize the Letters of Credit to
secure payments to suppliers of Inventory and other goods. Letters
of Credit shall be issued by the Bank for the account of the
Borrower in favor of a named beneficiary specified by the Borrower
upon written notice requesting such issuance. The beneficiary of
any such Letter of Credit shall be authorized to draw upon the Bank
on the terms and subject to the conditions set forth in such Letter
of Credit. All such Letters of Credit shall be issued subject to
and shall be governed by the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce
("UCP") as in effect from time to time and, as to matters not
governed by the UCP, shall he governed by Article 5 of the UCC. No
such Letter of Credit shall be issued after or have a term
extending past the Maturity Date.
Section 3.2 Risks of Acts or Omissions.
--------------------------
(a) With respect to each Letter of Credit issued by the
Bank pursuant to this Article III, the Borrower agrees to accept
all risks of acts or omissions of any beneficiary or transferee of
any such Letter of Credit. In furtherance of and not in limitation
of, the rights and powers of the Lender under the UCP, but subject
to all other provisions of this Article III, it is understood and
agreed, with respect to each such Letter of Credit, that the Lender
shall not have any liability for and the Borrower assumes all
responsibility for:
(b) the genuineness of any signature;
(c) the form, correctness, validity, sufficiency,
genuineness, falsification and legal effect of any draft,
certification or other document required by any such Letter of
Credit or the authority of the person signing the same;
(d) the failure of any instrument to bear any reference
or adequate reference to any such Letter of Credit or the failure
of any person to note the amount of any instrument on the reverse
side of any such Letter of Credit or to surrender any such Letter
of Credit or to forward documents in the manner required by any
24
such Letter of Credit, or otherwise to comply with the terms an
conditions of any Letter of Credit or;
(e) the good faith or acts of any person other than the
Lender and its agents and employees;
(f) the existence, form, sufficiency or breach of or
default under any agreement or instrument of any nature whatsoever;
(g) any delay in giving or failure to give any notice,
demand or protest; and
(h) any error, omission, delay in or nondelivery of any
notice or other communication, however sent.
Section 3.3 Documentation. The determination as to whether
-------------
the required documents are presented prior to the expiration of any
such Letter of Credit and whether such other documents are in
proper and sufficient form for compliance with any such Letter of
Credit shall be made by the Bank in its sole and absolute
discretion, which determination shall be conclusive and binding
upon the Borrowers and the named beneficiary.
Section 3.4 Action, Inaction and Omissions by Bank. Any
--------------------------------------
action, inaction or omission on the part of the Bank under or in
connection with any such Letter of Credit or related instruments or
documents, if in good faith and conformity with such laws,
regulations or commercial or banking customs as the Bank may deem
to be applicable, shall (i) be binding upon the Borrower, (ii)
shall not place the Bank under any liability to the Borrower, and
(iii) shall not affect, impair or prevent the vesting of any of the
rights or powers of the Bank hereunder or the Borrower's obligation
to make reimbursements of any amount paid on any such Letter of
Credit.
Section 3.5 Change in Law or Regulations. If any change in
----------------------------
any law, executive order, or regulation or in any request or
directive of any administrative or governmental authority (whether
or not having the force of law) or in the interpretation of any of
the foregoing by any court or administrative or governmental
authority charged with the administration thereof shall either:
(i) improve, modify or deem applicable any reserve,
special deposit or similar requirement against Letters of Credit
issued by the Bank, or
(ii) impose on the Bank any other condition regarding
this Agreement and any Letter of Credit or issued pursuant hereto,
and the effect of any such change shall be to increase the cost to
the Bank of issuing or maintaining any such Letter of Credit.
25
Upon demand by the Bank or the Lender, the Borrower shall
immediately pay to the Bank or the Lender from time to time as
specified by the Bank or the Lender, an additional amount which
shall be sufficient to compensate the Bank or the Lender for such
increased cost, together with interest on each such amount from the
date demanded until payment in full is tendered, at a rate per
annum equal to two (2%) per annum over and above the Bank's or the
Bank's floating Base Rate. The Bank's or the Lender's
determination of the amount of such costs (and the allocation, if
any, of such costs among the Borrower and other customers which
have arrangements with the Bank or the Lender similar to those
contained herein relating to Letter of Credit) shall, in the
absence of manifest error, be conclusive. Upon request from the
Borrower, the Bank or the Lender shall provide an explanation of
the basis of such allocation.
Section 3.6 Payments and Fees. The Lender shall be paid,
-----------------
upon demand, the Bank's fees and expenses for Letters of Credit and
as such are then in effect, as the Bank, in its sole and absolute
discretion, shall set from time to time. The Lender shall be paid
a fee of one and one-half (1 1/2%) percent of the face amount of
all Letters of Credit, not to exceed ninety (90) days. Said fees
shall he payable to the Lender upon the issuance of a Letter of
Credit and upon the renewal of a Letter of Credit. All fees and
expenses may be charged by the Lender to any loan account of the
Borrower maintained with the Lender. The Lender shall also be
paid, upon demand, all payments made, or expenses incurred, in
connection with the processing of or payment under any such Letters
of Credit. The obligation of the Borrower to reimburse the Lender
shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff. In the sole and absolute
discretion of the Lender, any payment not rendered upon demand may
be deemed an additional sum borrowed.
26
ARTICLE IV
REPAYMENTS
----------
Section 4.1 Payments and Computations.
-------------------------
(a) Each payment made by the Borrower to the Lender
under this Agreement shall be made in United States dollars at the
Lender's offices set forth in the preamble to this Agreement not
later than 2:00 p.m., on the due date of such payment, and in
immediately available and freely transferable funds.
(b) If any sum would, but for the provisions of this
Agreement, become due and payable by the Borrower under this
Agreement on any day which is not a Business Day, then such sum
shall become due and payable on the Business Day next succeeding
the day on which such sum would otherwise have become due and
payable hereunder or thereunder, and interest and fees payable to
the Lender under this Agreement shall be adjusted accordingly.
(c) All computations of interest and fees payable to the
Lender under this Agreement shall be made on the basis of the
actual number of days elapsed divided by 360.
(d) The Bank will determine the Base Rate of Interest in
effect from time to time. Any change in the Base Rate of Interest
shall, for all purposes of this Agreement become effective on, and
from the beginning of, the day on which such change shall first be
announced by the Lender in accordance with the Lender's customary
banking practices.
(e) Each amount payable by the Borrower to the Lender
under this Agreement that is not paid when due (whether at the
Maturity Date, by acceleration or otherwise) and to the extent
permitted by applicable law shall bear interest, from the date on
which such amount shall have first become due and payable by the
Borrower to the date on which such amount shall be paid by the
Borrower (whether before or after judgment), at the annual rate of
interest that shall at all times be five (5%) percent above the
annual rate of interest if such amount were not overdue. The
unpaid interest accrued on any overdue amount in accordance with
this Agreement shall become and be absolutely due and payable by
the Borrower to the Lender on written demand by the Lender at any
time. Interest on each overdue amount will continue to accrue and
will (to the extent permitted by applicable law) be compounded
monthly until the obligations of the Borrower in respect of the
payment of such overdue amounts are discharged (whether before or
after judgment).
(f) No provision of this Agreement shall require the
payment or permit the collection of interest in excess of the rate
then permitted by applicable law, provided, that if any provision
--------
27
is so limited by such applicable law, the interest shall be the
maximum amount permitted thereunder.
28
ARTICLE V
LIMIT OF LOANS AND LETTERS OF CREDIT
------------------------------------
Section 5.1 Maximum Commitment.
------------------
(a) The maximum commitment from the Lender to Borrower
for the Loans and Letters of Credit and is as defined in this
Agreement. However, at no time may the amount advanced under the
Loans and the amount of the Letters of Credit exceed the Maximum
Limit of Six Million and 00/100 ($6,000,000.00) Dollars unless the
same is permitted by the Lender, in its sole discretion, pursuant
to Section 2.1(b) of this Agreement.
29
ARTICLE VI
CONDITIONS TO INITIAL EXTENSION OF CREDIT
-----------------------------------------
The obligation of the Lender to make the initial Extension of
Credit under this Agreement shall be subject to the satisfaction or
waiver by the Lender, prior thereto or concurrently therewith, of
each of the following conditions precedent:
Section 6.1 Loan Documents, the Mortgage, etc. Each of the
---------------------------------
Loan Documents shall have been duly and properly authorized,
executed and delivered by the parties hereto and shall be in full
force and effect on and as of the Closing Date and the Mortgage
shall have been duly and properly authorized, executed and
delivered by Borrower and shall be in full force and effect on and
as of the Closing Date.
Section 6.2 Representations and Warranties. Each of the
------------------------------
representations and warranties made by or on behalf of the Borrower
to the Lender in this Agreement or in other Loan Documents shall be
true and correct in all material respects on the Closing Date.
Section 6.3 Certified Copies of Charter Documents. The Lender
-------------------------------------
shall have received from the Borrower certified by a duly
authorized officer to be true and complete on and as of a date
which is not more than ten (10) Business Days prior to the Closing
Date, a copy of each of (a) the charter of incorporation or such
other incorporation documents of the Borrower in effect on such
date of certification, and (b) the by-laws in effect on such date.
Section 6.4 Proof of Corporate Action. The Lender shall have
-------------------------
received from the Borrower a copy, certified by a duly authorized
officer to be true and complete on and as of the date which is not
more than ten (10) Business Days prior to the Closing Date, of the
records of all corporate action taken by the Borrower to authorize
(a) its execution and delivery of each of the Loan Documents to
which it is or is to become a party as contemplated or required by
this Agreement, (b) its performance of all of its agreements and
obligations under each of such documents, and (c) the incurring of
the obligations contemplated by this Agreement.
Section 6.5 Legal Opinions. The Lender shall have received a
--------------
written legal opinion, addressed to the Lender, dated the Closing
Date, from Xx. Xxxxx Xxxxxx as counsel to the Borrower and the
Guarantor(s). Such legal opinion shall be acceptable to the Lender
and its counsel.
Section 6.6 Collateral.
----------
(a) All of the obligations of the Borrower to the Lender
under or in respect of this Agreement shall be entitled to all of
the benefits of and be secured by this Agreement, the Mortgage, and
30
the Loan Documents, and the Lender shall have obtained a first,
perfected security interest in the Collateral of the Borrower.
(b) The Loan Documents and all other documents in
respect thereto, which shall create and maintain a first perfected
security interest in favor of the Lender and the appropriate
financing statements in respect thereto and necessary to enable the
Lender to perfect its security interests thereunder, shall have
been duly executed and delivered by the Borrower to the Lender.
(c) The Guaranty of Xxxxxxx Xxxxx is secured by certain
real and personal property as described in the Mortgage.
31
ARTICLE VII
CONDITIONS TO MAKING EACH SUBSEOUENT EXTENSION OF CREDIT
--------------------------------------------------------
The obligations of the Lender to make the Extension of Credit
to the Borrower subsequent to the initial Extension of Credit,
shall be subject to the satisfaction or waiver by the Lender, prior
thereto or concurrently therewith, of each of the following
conditions precedent:
Section 7.1 Applications and Compliance. The application for
---------------------------
such Extension of Credit shall have been made by the Borrower to
the Lender in accordance with the applicable provisions of this
Agreement and in compliance with all provisions of this Agreement.
Section 7.2 Representations and Warranties. Each of the
------------------------------
representations and warranties made by or on behalf of the Borrower
to the Lender in this Agreement or in other Loan Documents shall
have been true and correct in all material respects when made,
shall, for all purposes of this Agreement, be deemed to be repeated
on and as of each Advance Date, and shall be true and correct in
all material respects on and as of each such date, except to the
extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior to such Advance
Date.
Section 7.3 Performance, etc. The Borrower shall have duly
----------------
and properly performed, complied with and observed each of its
covenants, agreements and obligations contained in this Agreement,
and shall have duly and properly performed, complied with and
observed in all material respects its covenants, agreements and
obligations in all other articles of this Agreement and any of the
Loan Documents to which it is a party or by which it is bound on
each Advance Date. No event shall have occurred on or prior to
such Advance Date and be continuing on such Advance Date, and no
condition shall exist on such Advance Date, which constitutes an
Event of Default or which would, with notice or the lapse of time,
or both, constitute an Event of Default under this Agreement or any
of the Loan Documents.
32
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to the Lender, knowing
and intending that the Lender shall rely thereon in making the
loans completed hereby, that:
Section 8.1 Corporate Existence; Good Standing.
----------------------------------
(a) The Borrower (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and authorized to do business in the State of New
Jersey, and (ii) has all requisite corporate power and authority
and full legal right to own or to hold under lease its properties
and to carry on the business in which it is presently engaged.
(b) The Borrower has adequate corporate power and
authority and has full legal rights to enter into each of the Loan
Documents to which it is a party, to perform, observe and comply
with all of its agreements and obligations under each of such
documents, and to obtain all of the Advances contemplated by this
Agreement.
Section 8.2 Corporate Authority, etc. (a) The execution and
------------------------
delivery by the Borrower of the Loan Documents to which it is a
party, the performance by the Borrower of all of its agreements and
obligations under each of such documents, and the incurring by the
Borrower of all of the Obligations contemplated by this Agreement,
have been duly authorized by all necessary corporate actions on the
part of the Borrower and its shareholders and do not and will not
contravene any provision of the Borrower's charter or by-laws or
this Agreement (each as from time to time in effect), (b) conflict
with, or result in a breach of the terms, conditions, or provisions
of, or constitute a default under, or result in the creation of any
mortgage, lien, pledge, charge, security interest or other
encumbrance upon any of the property of the Borrower under any
material agreement, mortgage or other instrument to which the
Borrower is or may become a party, (c) violate or contravene any
provision of any law, regulation, order, ruling or interpretation
thereunder or any decree, order or judgment or any court or
governmental or regulatory authority, bureau, agency or official
(all as from time to time in effect and applicable to such entity),
(d) require any waivers, consents or approvals by any of the
creditors or trustees for creditors of the Borrower, or (e) require
any approval, consent, order, authorization, or license by, or
giving notice to, or taking any other action with respect to, any
governmental or regulatory authority or agency except those actions
that have been taken or will be taken prior to the Closing Date,
under any provision of any applicable law.
33
Section 8.3 Binding Effect of Documents, etc. The Borrower
--------------------------------
has duly executed and delivered each of the Loan Documents to which
it is a party, and each of such documents is in full force and
effect. The agreements and obligations of the Borrower as
contained in each of the Loan Documents constitutes or upon
execution and delivery thereof will constitute legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
Section 8.4 No Events of Default, etc.
-------------------------
(a) No Event of Default has occurred and is continuing
and no event has occurred and is continuing and no condition exists
that would, with notice or the lapse of time, or both, constitute
an Event of Default.
(b) The Borrower is not in default in any material
respect under any contract, agreement or instrument to which the
Borrower is a party or by which the Borrower or any of the Property
of the Borrower is bound, the consequence of which default could
materially or adversely affect the financial condition, assets,
operations or property of the Borrower.
Section 8.5 No Governmental Consent Necessary. No consent or
---------------------------------
approval of, giving of notice to, registration with or taking of
any other action in respect of, any governmental authority or
agency is required with respect to the execution, delivery and
performance by Borrower of this Agreement and the Loan Documents to
which it is a party.
Section 8.6 No Proceedings. There are no actions, suits, or
--------------
proceedings pending or threatened against or affecting Borrower in
any court or before any governmental commission, board, or
authority which, if adversely determined, will have an adverse
effect on the ability of Borrower to perform its obligations under
this Agreement or the Loan Documents to which it is a party.
Section 8.7 No Violations of Laws. The Borrower has
---------------------
conducted, and is conducting, its business, so as to comply in all
material respects with all applicable federal, state, county and
municipal statutes and regulations. The Borrower is not charged
with, or so far as is known by the Borrower, is not under
investigation with respect to, any violation of any such statutes,
regulations or orders, which could have a material or adverse
effect on the financial condition, business or operations of the
Borrower.
Section 8.8 Use of Proceeds of the Loan. Proceeds from the
---------------------------
Loan shall be used only for those purposes set forth in this
Agreement. No part of the proceeds of the Loan shall be used,
directly or indirectly, for the purpose of purchasing or carrying
any margin stock within the meaning of Regulation U of the Board of
34
Governors of the Federal Reserve System, or for the purpose of
purchasing or carrying or trading in any stock under such
circumstances as to involve the Borrower in a violation of
Regulation X of the Board of Governors of the Federal Reserve
System or the Lender in a violation of Regulation U of said Board
of Governors. In particular, without limitation of the foregoing,
no part of the proceeds from the Loans are intended to be used to
acquire any publicly-held stock of any kind.
Section 8.9 Financial Statements.
--------------------
(a) Subject to any limitation stated therein, all
balance sheets, income statements and other financial data which
have been or shall hereafter be furnished to the Lender to induce
it to enter into this Agreement, and to continue to provide
financing under this Agreement or otherwise in connection herewith,
do and will truly and accurately represent the financial condition
of the Borrower as at the periods for which the same are furnished
to the Lender. All other information, reports and other papers and
data furnished to the Lender are, or will be at the time the same
are so furnished, true, accurate and complete in all material
respects.
(b) Except as shown on the most recent financial
statements which have been delivered to the Lender, the Borrower
has no other Indebtedness as of the date hereof which would
materially or adversely affect the financial condition of the
Borrower or the Collateral.
Section 8.10 Changes in Financial Condition. There has been
------------------------------
no material change in the Borrower's financial condition since the
date of its last financial statements which have been delivered to
the Lender.
Section 8.11 Accounts Receivable. The most recent list of
-------------------
Accounts Receivable of the Borrower delivered to the Lender is
complete, and contains an accurate aging thereof. All of said
Accounts Receivable are collectible, are subject to no
counterclaims or setoffs of any nature whatsoever, and require no
further act on the Borrower's part to make such accounts owing by
the account debtors. None of the accounts include any conditional
sales, consignments or sales on any basis other than that of
absolute sale in the ordinary and usual course of business, except
as otherwise set forth on said list. No agreement has been made
under which any deductions or discounts may be claimed as to any
such account except customary discounts in the ordinary course of
business.
Section 8.12 Inventory. The Borrower's Inventory, as of the
---------
date hereof, consists of items of quality and quantity usable or
saleable in the ordinary course of its business. The value of
obsolete items, items below standard quality and items in the
35
process of repair have been written down to realizable market
value, or adequate reserves have been provided therefore, and the
values carried on the balance sheet are set at the lower of cost of
market, in accordance with generally accepted accounting principles
consistently applied.
Section 8.13 Taxes and Assessments. The Borrower has paid
---------------------
and discharged when due all taxes, assessments and other
governmental charges which may lawfully be levied or assessed upon
its income and profits, or upon all or any portion of any property
belonging to it, whether real, personal or mixed, to the extent
that such taxes, assessments and other charges have become due.
The Borrower has filed all tax returns, federal, state and local,
and all related information, required to be filed by it.
Section 8.14 ERISA.
-----
(a) The Borrower is in compliance in all respects with
the applicable provisions of ERISA and all regulations issued
thereunder by the United States Treasury Department, the Department
of Labor and the Pension Benefit Guaranty Corporation.
(b) No "Employee Benefit Plan", as defined in Section 3
of ERISA, maintained by the Borrower, as from time to time in
effect (hereinafter called the "Benefit Plans" or individually
"Benefit Plan") nor any trusts created thereunder, nor any trustee
or administrator thereof has engaged in a "prohibited transaction",
as defined in Section 4975 of the Internal Revenue Code of 1954, as
amended, which could subject the Borrower, any Benefit Plan or any
such trust, or any trustee or administrator thereof, or any party
dealing with any Benefit Plan, or any such trust to the tax or
penalty on prohibited transactions imposed by said Section 4975.
Neither any of the Benefit Plans nor any such trusts have been
terminated, nor has there been any "reportable event", as defined
in Section 4043 of ERISA, or "accumulated funding deficiency." The
Borrower has not incurred any liability to the Pension Benefit
Guaranty Corporation.
Section 8.15 O.S.H.A. and Environmental Matters.
----------------------------------
(a) The Borrower has duly complied with, and its
facilities, business assets, property, leaseholds and equipment are
in compliance in all material respects with, the provisions of the
federal Occupational Safety and Health Act, the Environmental
Protection Act, the Clean Air Act, the Water Pollution Control
(Clean Water) Act, the Resource Conservation and Recovery Act, and
the Comprehensive Environmental Response Compensation and Liability
Act (including the Superfund Amendment and Reauthorization Act of
1986), and all rules and regulations thereunder and all similar
state and local laws, rules and regulations; and there have been no
outstanding citations, notices or orders of non-compliance issued
36
to the Borrower or relating to its business, assets, property,
leaseholds or equipment under any such laws, rules and regulations.
(b) The Borrower has been issued all required federal,
state and local licenses, certificates or permits relating to the
operation of its business; and the Borrower and its facilities,
business, assets, property and equipment are in compliance in all
respects with, all applicable federal, state and local laws, rules
and regulations relating to air emissions, water discharge, noise
emissions, solid or liquid waste disposal, hazardous waste or
materials, or other environmental, health or safety matters,
including, without limitation, the Spill Compensation and Control
Act (N.J.S.A. 58-10-23.11 et seq.). and the Industrial Site
Recovery Act (N.J.S.A. 13:lK-6 et seq., as amended).
Section 8.16 Location of Collateral. As of the date hereof,
----------------------
none of the Collateral to be conveyed to the Lender as collateral
security pursuant to this Agreement, or any Loan Document, or to be
hereafter conveyed, is or will be located in or on any property
other than those set forth in this Agreement.
Section 8.17 Other Liens. The Borrower has good and
-----------
marketable title to and owns all of the Collateral free and clear
of any and all liens, encumbrances or security interests
whatsoever. None of the Collateral is subject to any prohibition
against encumbering, pledging, hypothecating or assigning the same
or requires notice or consent to Borrower's doing of the same.
Section 8.18 Books and Records. The Borrower maintains its
-----------------
books and records related to its Accounts Receivable and its
Inventory at 000 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000.
Section 8.19 Representations and Warranties: True, Accurate
----------------------------------------------
and Complete.
------------
(a) None of the representations, warranties or
statements made to the Lender pursuant hereto or in connection with
this Agreement or the transactions contemplated hereby contains any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances in which they are
made, not misleading.
(b) All warranties and representations made herein or in
any of the Loan Documents by the Borrower will be true and accurate
at the time the Borrower requests the Lender to make an Advance to
it hereunder.
Section 8.20 Names, Location of Offices. Schedule hereto
--------------------------
sets forth a complete and accurate list of all offices and
locations at or out of which the Borrower conducts any of its
37
business or operations, said Schedule A to indicate the Borrower's
chief executive office if it has more than one.
Section 8.21 Capitalization; Ownership of the Borrower. On
and as of the Closing Date the authorized Capital Stock of the
Borrower will consist of Fifty Million (50,000,000) shares of
common stock, .001 par value. Two Million Nine Hundred Ninety
Seven Thousand Two Hundred Eighteen (2,997,218) shares of common
stock are duly issued, are outstanding and are fully paid and
non-assessable.
38
ARTICLE IX
AFFIRMATIVE COVENANTS
---------------------
Until payment in full of all Obligations and the termination
of this Agreement, the Borrower hereby covenants and agrees that it
will:
Section 9.1 Notify Lender. Promptly inform the Lender if any
-------------
one or more of the representations and warranties made by the
Borrower in this Agreement or in any document related hereto shall
no longer be entirely true, accurate and complete.
Section 9.2 Pay Taxes and Liabilities; Comply with Agreement.
-----------------------------------------------
Promptly pay, when due, all indebtedness, sums and liabilities of
any kind now or hereafter owing by the Borrower to any party
however created, incurred, evidenced, acquired, arising or payable,
including without limitation the Obligations, income and excise
taxes and taxes with respect to any of the Collateral, or any wages
or salaries paid by the Borrower or otherwise.
Section 9.3 Observe Covenants, etc. Observe, perform and
----------------------
comply with the covenants, terms and conditions of this Agreement,
the Loan Documents and any other agreement or document entered into
between the Borrower and the Lender.
Section 9.4 Maintain Corporate Existence and Qualifications.
-----------------------------------------------
Maintain and preserve in full force and effect, its corporate
existence and rights, franchises, licenses and qualifications
necessary to continue its business, and comply with all applicable
statutes, rules and regulations pertaining to the operation,
conduct and maintenance of its regulations of its existence and
business including, without limitation, all federal, state and
local laws relating to benefit plans, environmental safety, or
health matters, and hazardous or liquid waste or chemicals or other
liquids (including use, sale, transport and disposal thereof).
Section 9.5 Information and Documents to be Furnished to the
------------------------------------------------
Lender. Borrower hereby covenants to the Lender that it will
------
furnish to the Lender:
(a) Annual Financial Statements. As soon as delivered
---------------------------
to any other creditor, but in no event later than ninety (90) days
after the end of each fiscal year, its balance sheet as at the end
of such year, and its income and surplus statement for such fiscal
year, all in reasonable detail, all prepared on an audited basis in
accordance with GAAP by independent certified public accountants of
recognized standing selected by the Borrower and satisfactory to
the Lender.
(b) Quarterly Financial Statements. As soon as
------------------------------
delivered to any other creditor but in no event later than thirty
39
(30) days after the end of each quarterly fiscal period of Borrower
except the fourth, its cumulative income and surplus statement,
balance sheet and cash flow statement for the period beginning on
the first day of such fiscal year and ended on the date of such
balance sheet all in reasonable detail, prepared by the Chief
Financial Officer.
(c) Accounts Receivable and Inventory Certificates. In
----------------------------------------------
such form as may be required by the Lender, from time to time as
the Lender may additionally require:
(i) A certificate either describing each Eligible
Account Receivable, or, if the Lender so elects, certifying the
face amount of all Eligible Accounts Receivable in the aggregate
and a certified statement of its Inventory position showing
Inventory on hand, Inventory represented or covered by warehouse
receipts or bills of lading, Eligible Inventory on hand and
Inventory in possession of bailees, including the names and
addresses of such bailees; and
(ii) Schedules of Eligible Accounts Receivable
describing each, and schedules of current Inventory position.
(d) Accounts Receivable's Aging Reports. On or before
-----------------------------------
the fifteenth (15th) day of each month, a detailed aging report
setting forth amounts due and owing on Accounts Receivable on the
Borrower's books as of the close of the preceding month, together
with a reconciliation report satisfactory to the Lender showing all
sales, collections, payments and adjustments to Accounts
Receivables on the Borrower's books as of the close of the
preceding month.
(e) Accounts Payable's Aging Reports. Within fifteen
--------------------------------
(15) days of each month during the term of the Loan, an aging
report, in form, content and substance reasonably acceptable to the
Lender, setting forth amounts due and payable on Accounts Payable
on the Borrower's books as of the close of the preceding month,
together with a reconciliation report reasonably satisfactory to
the Lender showing any and all adjustments to Accounts Payable on
the Borrower's books as of the close of the preceding month.
(f) Inventory Reports. Within fifteen (15) days of each
-----------------
month during the term of the Loan (i) a report of Inventory in form
reasonably satisfactory to the Lender setting forth total value of
finished goods, work in progress and raw materials, and (ii) the
location of the Inventory.
(g) Borrowing Base Certificate. Upon each request for
--------------------------
an Advance, and at least weekly, a Borrowing Base Certificate, in
form and substance satisfactory to Lender, certified by the chief
financial officer of the Borrower.
40
(h) Affiliate Outstandings. Within ten (10) days after
----------------------
the end of each month during the term of the Loan, a detailed aging
report, in form, content and substance acceptable to the Lender,
setting forth amounts due and owing on all amounts due affiliates
of the Borrower on the Borrower's books as of the close of the
preceding month.
(i) Sales Journal and Register. The Borrower shall
--------------------------
provide the Lender with its sales journal and cash receipts on a
daily basis or less frequently as permitted by the Lender
(including invoices and signed shipping documents).
(j) Rejection, Delay, Claims. Within five days, notice
------------------------
of the rejection of goods, delay in performance, or claims made in
regard to Accounts Receivable.
(k) ERISA Documents. All ERISA reports, notices,
---------------
returns and all other documents filed as required by or in
compliance with ERISA, whether to the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or
any other appropriate agency, and all documents and information
distributed to participants in any Benefit Plan.
(l) Notice of Judgments, Environmental, Health or Safety
----------------------------------------------------
Complaints.
----------
(i) Within five days, written notice to the Lender
of the entry of any judgment or the institution of any lawsuit or
of other legal or equitable proceedings or the assertion of any
crossclaim or counterclaim seeking monetary damages from the
Borrower in an amount exceeding $25,000.00;
(ii) Within five days, notice or copies if written
of all claims, complaints, orders, citations or notices, whether
formal or informal, written or oral, from a governmental body or
private person or entity, relating to air emissions, water
discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or
safety matter. Such notices shall include, among other
information, the name of the party who filed the claim, the
potential amount of the claim, and the nature of the claim.
(m) Other Information. Upon demand:
-----------------
(i) Certificates of insurance for all policies of
insurance to be maintained by Borrower pursuant hereto;
(ii) An estoppel certificate executed by an
authorized officer of the Borrower indicating that there then
exists no Event of Default and no event which, with the giving of
notice or lapse of time, or both, would constitute an Event of
Default under any agreement to which Borrower is a party;
41
(iii) All original and other documents evidencing
right to payment, including but not limited to invoices, original
orders, shipping and delivery receipts;
(iv) All information received by Borrower affecting
the financial status or condition of any account debtor; and
(v) Assignments, in form acceptable to Lender, of
all Eligible Accounts Receivable, and of the monies due or to
become due on specific contracts relating to the same.
(n) From time to time, such other information as Lender
may reasonably request, including financial projections and cash
flow analysis.
Section 9.6 Access to Records and Property. At any time and
------------------------------
from time to time, upon request by the Lender, the Borrower shall
give any representatives of Lender access during normal business
hours to, and permit any of them to examine, audit, copy or make
extracts from, any and all books, records and documents in the
possession of the Borrower or any independent contractor relating
to the Borrower's affairs and the Collateral, and to inspect any of
its properties wherever located.
Section 9.7 Administrative Fee. The Borrower will pay to the
------------------
Lender an administrative fee of $1,000.00 per month commencing on
the Closing Date and on the first day of each month thereafter.
Section 9.8 Comply with Laws. The Borrower shall comply with
----------------
the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, compliance with which is
necessary to maintain its corporate existence or the conduct of its
business or non-compliance with which would materially or adversely
effect its ability to perform its obligations or any security given
to secure its obligations.
Section 9.9 Insurance Required.
------------------
(a) The Borrower shall cause to be maintained, in full
force and effect on all property of the Borrower including without
limitation, all inventory and equipment for all Obligations,
insurance in such amounts against such risks as is satisfactory to
the Lender, including, but without limitation, fire, theft,
burglary, pilferage, vandalism, malicious mischief, loss in
transit, and hazard insurance and, if on the Closing Date any of
the Mortgaged Property or location where Inventory is maintained is
in an area that has been identified by the Secretary of Housing and
Urban Development as having special flood or mudslide hazards, and
on which the sale of flood insurance has been made available under
the National Flood Insurance Act of 1968, then flood insurance.
Said policy or policies shall:
42
(i) Be in a form and with insurers which are
satisfactory to the Lender;
(ii) Be for such risks and for such insured values
as Lender or its assigns may require in order to replace the
property in the event of actual or constructive total loss;
(iii) Designate the Lender and its assignees, as
mortgagee and additional insured loss payees as their interests may
from time to time appear;
(iv) Contain a "breach of warranty clause" whereby
the insurer agrees that a breach of the insuring conditions or any
negligence by Borrower or any other person shall not invalidate the
insurance as to Lender and its assignee;
(v) Provide that they may not be canceled or
materially altered without ten (10) days prior notice to the Lender
and its assigns; and
(vi) Upon demand, be delivered to the Lender;
(b) The Borrower shall obtain such additional insurance
as Lender may reasonably require;
(c) The Borrower shall in the event of loss or damage,
forthwith notify the Lender and file proofs of loss with the
appropriate insurer. The Borrower hereby authorizes the Lender to
endorse any checks or drafts constituting insurance proceeds;
(d) The Borrower shall forthwith upon receipt of
insurance proceeds endorse and deliver the same to the Lender; and
(e) In no event shall the Lender be required either to
(i) ascertain the existence of or examine any insurance policy or
(ii) advise the Borrower in the event such insurance coverage shall
not comply with the requirements of this Agreement.
Section 9.10 Condition of Collateral; No Liens. The Borrower
---------------------------------
shall maintain all Collateral conveyed to the Lender as collateral
security in good condition for any Obligations and repair at all
times, preserve it against any loss, damage, or destruction of any
nature whatsoever relating to said Collateral or its use, and keep
said Collateral free and clear of any liens, except Permitted
Encumbrances created pursuant hereto or disclosed herein.
Section 9.11 Payment of Proceeds. The Borrower shall
-------------------
forthwith upon receipt of all proceeds of Collateral, pay such
proceeds over to Lender, and such proceeds shall thereupon become
Lender's sole property.
43
Section 9.12 Pay Legal Fees and Expenses. The Borrower shall
---------------------------
pay to the Lender, upon demand, together with interest at the
Default Rate hereof, from the date when incurred or advanced by the
Lender until repaid by the Borrower all costs, expenses or other
sums incurred or advanced by the Lender (including legal fees and
disbursements) to preserve, collect and protect the Lender's
interest in or realization on the Collateral, and to enforce the
Lender's rights as against the Borrower, any account debtor or
guarantor, or in the prosecution or defense of any action or
proceeding related to the subject matter of this Agreement or the
Loan Documents, including without limitation, reasonable legal
fees, expenses and disbursements referred to in this Agreement.
All such expenses, costs and other sums shall be deemed Obligations
secured by the Collateral.
Section 9.13 Records. The Borrower shall at all times keep
-------
accurate and complete records of the Collateral and the status of
each Account Receivable.
Section 9.14 Delivery of Documents. If any proceeds of
---------------------
Accounts Receivable shall include or any of the Accounts Receivable
shall be evidenced by notes, trade acceptances or instruments or
documents, or if any Inventory is covered by documents of title or
chattel paper, whether or not negotiable, the Borrower waives
protest regardless of the form of the endorsement. If the Borrower
fails to endorse any instrument or document, the Lender is
authorized to endorse it on the Borrower's behalf.
Xxxxxxx 0.00 Xxxxxx Xxxxxx Contracts. If any of the Eligible
-----------------------
Accounts Receivable arise out of contracts with the United States
or any of its departments, agencies or instrumentalities, the
Borrower will notify the Lender and execute any necessary
instruments in order that all monies due or to become due under
such contract shall be assigned to the Lender and proper notice of
the assignment given under the Federal Assignment of Claims Act.
Section 9.16 Name Changes; Location Changes.
------------------------------
(a) The Borrower shall immediately notify the Lender if
the Borrower is known by or conducting business under any names
other than those set forth in this Agreement; and
(b) Immediately notify the Lender if the Borrower is
conducting any of its business or operations at or out of offices
or locations other than those set forth in this Agreement, or if it
changes the location of its chief executive office.
Section 9.17 Further Assurances. The Borrower shall at any
------------------
time or from time to time upon request of the Lender take such
steps and execute and deliver such financing statements and other
documents all in the form of substance satisfactory to the Lender
relating to the creation, validity or perfection of the security
44
interests provided for herein, under the UCC or other laws of the
State of New Jersey or of another state or states.
Section 9.18 Indemnification. The Borrower shall indemnify,
---------------
protect, defend and save harmless the Lender, as well as the
Lender's directors, officers, trustees, employees, agents,
attorneys and shareholders (hereinafter referred to collectively as
the "Indemnified Parties" and individually as an "Indemnified
Party") from and against (i) any and all losses, damages, expenses
or liabilities of any kind or nature and from any suits, claims or
demands, by third parties including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any
of them and caused by, relating to, arising out of, resulting from,
or in any way connected with the Loans and the transactions
contemplated herein, (ii) any and all losses, damages, expenses or
liabilities sustained by the Lender in connection with any
environmental sampling or cleanup of any property which constitutes
part of the Collateral required or mandated by any federal, state
or local law, ordinance, rule or regulation, including, without
limitation, the Environmental Laws or from an action or claim by
the Borrower against the Indemnified Party. In case any action
shall be brought against an Indemnified Party based upon any of the
above and in respect to which indemnity may be sought against the
Borrower, the Indemnified Party against whom such action was
brought, shall promptly notify the Borrower in writing, and the
Borrower shall assume the defense thereof, including the employment
of counsel selected by the Borrower and reasonably satisfactory to
the Indemnified Party, the payment of all costs and expenses and
the right to negotiate and consent to settlement. Upon reasonable
determination made by the Indemnified Party, the Indemnified Party
shall have the right to employ separate counsel in any such action
and to participate in the defense thereof; provided, however that
the Indemnified Party shall pay the costs and expenses incurred in
connection with the employment of separate counsel. The Borrower
shall not be liable for any settlement of any such action effected
without its consent, but if settled with the Borrower's consent, or
if there be a final judgment for the claimant in any such action,
the Borrower agrees to indemnify and save harmless said Indemnified
Party against whom such action was brought from and against any
loss or liability by reason of such settlement or judgment, except
as otherwise provided above. The provisions of this Section shall
survive the termination of this Agreement and the final repayment
of the Loans.
Section 9.19 Annual Facility Fee. The Borrower shall pay to
-------------------
the Lender the sum of Forty Thousand and 00/100 ($40,000.00)
Dollars on each anniversary date of the closing of the Loan.
Section 9.20 Closing Fee. Borrower agrees to pay to the
-----------
Lender a closing fee of Forty Thousand and 00/100 ($40,000.00)
Dollars which is deemed to be fully earned on the date hereof and
shall be paid by the Borrower on the date hereof.
45
Section 9.21 Amendment Fee. In the event the Lender, at its
-------------
sole and absolute discretion, increases the Loan above Six Million
and 00/100 ($6,000,000.00) Dollars, an amendment fee of one (1%)
percent of such increase above Six Million and 00/100
($6,000,000.00) Dollars will be paid to the Lender on the date of
any such amendment.
Section 9.22 Year 2000 Technology. The advent of the year
--------------------
2000 shall not adversely affect the Borrower's operations or the
performance of its information technology. without limiting the
generality of the foregoing, (i) the hardware and software utilized
by Borrower are designed to be used prior to, during, and after
calendar year 2000 A.D. and such hardware and software will operate
during each such time period without error relating to date data,
specifically including any error relating to, or the conduct of,
date data which represents or references different centuries or
more than one century, (ii) the hardware and software utilized by
Borrower will not abnormally end or provide invalid or incorrect
results as a result of date data, and (iii) the hardware and
software utilized by Borrower have been designed to ensure year
2000 A.D. compatibility, including date data, century recognition,
leap year, calculations which accommodate same century and
multicentury formulas and date values, and date data interface
values that reflect the century.
Section 9.23 Escrow. The Borrower will, at the request of
------
the Lender, establish with the Lender an escrow account in which
the Borrower will deposit such amounts required by the Lender for
Letter of Credit and/or contingent liabilities to the Lender.
46
ARTICLE X
NEGATIVE COVENANTS
------------------
Until payment in full of all Obligations, the Borrow covenants
and agrees that:
Section 10.1 No Consolidation, Merger, Acquisition. The
-------------------------------------
Borrower will not consolidate with, merge with, or acquire the
stock or assets of any person, firm, joint venture, partnership,
corporation, or other entity, whether by merger, consolidation,
purchase of stock or otherwise, except in the ordinary course of
business.
Section 10.2 Disposition of Assets or Collateral. The
-----------------------------------
Borrower will not sell, lease, transfer, convey, or otherwise
dispose of any or all of its assets or Collateral, other than the
sale or lease of Inventory in the ordinary course of business.
Section 10.3 Other Liens. The Borrower will not incur,
-----------
create or permit to exist any mortgage, assignment, pledge,
hypothecation, security interest, lien or other encumbrance on any
of its property or assets, whether now owned or hereafter acquired,
except (a) liens for taxes not delinquent; (b) those liens in favor
of Lender created by this Agreement and the Loan Documents; (c) the
Permitted Encumbrances.
Section 10.4 Other Liabilities. The Borrower will not incur,
-----------------
create, assume or permit to exist any Indebtedness or liability on
account of either borrowed money or the deferred purchase price of
property, except (a) Obligations to the Lender; or (b) Indebtedness
subordinated to payment of the Obligations on terms approved by
Lender in writing; (c) the Permitted Encumbrances.
Section 10.5 Loans. The Borrower will not make loans to any
-----
person, firm or entity in excess of $10,000.00 per loan and not to
exceed in the aggregate $75,000.00 per fiscal year.
Section 10.6 Guaranties. The Borrower will not assume,
----------
guaranty, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm or entity
except (a) by the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business; (b) contingent obligations under letters of credit
entered into in the ordinary course of business for the purchase of
merchandise for resale.
Section 10.7 Remove Property. The Borrower will not remove,
---------------
or cause or permit to be removed, without Lender's prior written
consent, any of its Collateral or assets from those properties set
forth in this Agreement, except for sales of Inventory in the
ordinary course of Borrower's business.
47
Section 10.8 Transfers of Notes or Accounts Receivable. The
-----------------------------------------
Borrower will not sell, assign, transfer, discount or otherwise
dispose of any Accounts Receivable or any promissory note payable
to it with or without recourse, except for collection without
recourse in the ordinary course of business.
Section 10.9 Dividends. The Borrower will not declare or pay
---------
any cash dividend, make any distribution on, redeem, retire or
otherwise acquire directly or indirectly, any share of its stock
without prior written consent of the Lender; provided, however,
that the Borrower shall be permitted to make distributions of
S corporation earnings up to an amount equal to the actual increase
in the federal income taxes of the shareholders of the Borrower as
a result of their ownership of the stock of the Borrower.
Section 10.10 Modification of Documents. The Borrower will
-------------------------
not change, alter or modify, or permit any change, alteration or
modification of its certificate of incorporation, by-laws or other
governing documents without the Lender's prior written consent.
Section 10.11 Change Business. The Borrower will not
---------------
materially change or a alter the nature of its business.
Section 10.12 Settlements. The Borrower will not compromise,
settle or adjust any claims in a material amount relating to any of
the Collateral, without the prior written consent of the Lender.
Section 10.13 Change Location or Name. The Borrower will not
-----------------------
change the place where its books and records are maintained or
change its name or transact business under any other name.
Section 10.14 Investments. The Borrower will not make or
-----------
have any Restricted Investment except the following:
(i) Assets used in the ordinary course of business;
(ii) Current assets arising in the sale of goods and
services in the ordinary course of business of Borrower;
(iii) Investments in direct obligations of the United
States of America, or any agency thereof, or obligations guarantied
by the United States of America, but provided that such obligation
shall mature within one year from the date of acquisition thereof;
(iv) Investments in certificates of deposit maturing
within one year from the date of acquisition issued by a Lender or
trust company organized under the laws of the United States or any
state thereof; or
(v) Investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more
than 270 days from the date of creation thereof.
48
Section 10.15 Tangible Net Worth. The Borrower, at any time
------------------
during the term of the Loan, will not permit nor suffer or cause to
permit its Tangible Net Worth to be less than the following amounts
during the corresponding periods:
Period Amount
------ ------
Date hereof to June 30, 2000 $ (-450,000)
Subsequent to June 30, 2000 and any time thereafter, the Lender may
reset this covenant at its sole and absolute discretion.
Section 10.16 Working Capital. The Borrower, at any time
---------------
during the term of the Loan, will not permit nor suffer or cause to
permit its Working Capital to be less than the following amounts
during the corresponding periods:
Period Amount
------ ------
Date hereof to June 30, 2000 $1,000,000.00
Subsequent to June 30, 2000 and any time thereafter, the Lender may
reset this covenant at its sole and absolute discretion.
49
ARTICLE XI
EVENTS OF DEFAULT
-----------------
The occurrence of any of the following shall constitute an
event of default (hereinafter referred to as "Event of Default"):
Section 11.1 Failure to Pay. The Borrower's or any
--------------
Guarantor's failure to pay, when due, on demand, any payment of
principal, interest or other charges due and owing to the Lender
pursuant to any obligations of the Borrower to the Lender
including, without limitation, those Obligations arising pursuant
to this Agreement or any Loan Document, or under any other
agreement for the payment of monies then due and payable to the
Lender.
Section 11.2 Failure of Insurance. Failure on the part of
--------------------
the Borrower to pay or cause to be paid all premiums when due on
the insurance policies pursuant to this Agreement; failure to take
such other action as may be requested by the Lender in order to
keep said policies of insurance in full force and effect until the
entire indebtedness represented by the Loan Documents, and interest
thereon, has been paid in full; and failure on the part of the
Borrower to execute any and all documentation required by the
insurance companies issuing said policies to effectuate said
assignments.
Section 11.3 Failure to Perform. The Borrower's failure to
------------------
perform or observe any covenant, term or condition of this
Agreement to be performed or observed by the Borrower.
Section 11.4 Cross Default; Default on Other Debt.
------------------------------------
(a) The occurrence of any Event of Default on any of the
Obligations, an Event of Default under any Loan Document or any
default on any other obligation or indebtedness of the Borrower, or
any Guarantor to any third-party so that the holder of such
obligation or indebtedness declares such obligation or indebtedness
due prior to its date of maturity because of the Borrower's, or a
Guarantor's default thereunder.
(b) The failure of any Guarantor to perform or observe
any covenant, term or condition of any of the Loan Documents to
which any of them is a party.
(c) All other agreements between the Lender and the
Borrower and/or any affiliates of the Borrower are hereby amended
so that agreements and a default under any one of the other
agreements is a default under this Agreement.
Section 11.5 False Representation or Warranty. The Borrower
--------------------------------
or any Guarantor shall have made any statement, representation or
50
warranty in this Agreement or in any of the other Loan Documents to
which it is a party or in a certificate executed by the Borrower
incident to this Agreement, which is at any time found to have been
false in any material respect at the time such representation or
warranty was made.
Section 11.6 Liquidation, Dissolution, Assignment to
---------------------------------------
Creditors. Any resolution shall be passed or any action shall be
---------
taken by the Borrower or any Guarantor for the termination, winding
up, liquidation or dissolution of the Borrower or any Guarantor, or
the Borrower or any Guarantor shall make an assignment for the
benefit of creditors, become insolvent or be unable to pay its
debts as they mature, or the Borrower or any Guarantor shall file
a petition in voluntary liquidation or bankruptcy, or the Borrower
shall file a petition or answer or consent seeking the
reorganization of the Borrower or the readjustment of any of the
Indebtedness of the Borrower under applicable insolvency or
bankruptcy laws now or hereafter existing, or the Borrower or any
Guarantor shall consent to the appointment of any receiver,
administrator, liquidator, custodian or trustee of all or any part
of the property or assets of the Borrower or any Guarantor, or
corporate action shall be taken by the Borrower or any Guarantor
for the purposes of effecting any of the foregoing.
Section 11.7 Petition By or Against Borrower or any of the
---------------------------------------------
Guarantors. By order or decree of any court of competent
----------
jurisdiction, the Borrower or any Guarantor shall be adjudicated a
bankrupt or insolvent, or petition for proceedings in bankruptcy or
liquidation or for the reorganization or the readjustment of the
Indebtedness of the Borrower or any Guarantor under applicable
bankruptcy or insolvency laws now or hereafter existing shall be
filed against the Borrower or any Guarantor, and the Borrower or
any Guarantor shall admit the material allegations thereof, or an
order, judgment or decree shall be made approving such petition and
such order, judgment or decree shall not be vacated, set aside or
stayed within thirty (30) days after its entry, or any receiver,
administrator, liquidator or trustee shall be appointed for the
Borrower or any Guarantor or for all or any part of the property of
the Borrower or any Guarantor and such receiver, administrator,
liquidator or trustee shall not be discharged or his jurisdiction
shall not be relinquished, vacated or stayed, on appeal or
otherwise, within thirty (30) days after his appointment.
Section 11.8 Guarantor's Disclaimer of Liability. Any
-----------------------------------
Guarantor makes a disclaimer of liability or terminates its or his
liability under its or his Guaranty or the Guarantor breaches any
covenant, condition, warranty, representation or other provision of
the Guaranty.
Section 11.9 Judgments; Levies. Except for actions covered
-----------------
by insurance, any final judgment, order or decree for the payment
of money in excess of $25,000.00 shall be rendered against the
51
Borrower and the Borrower shall not discharge the same or provide
for its discharge in accordance with its terms, or procure a stay
of execution thereof pending appeal, within forty-five (45) days
after the date of entry thereof.
Section 11.10 Change in Condition. There occurs any event or
-------------------
any change in the condition or affairs, financial or otherwise, of
the Borrower or of any Guarantor which, in the opinion of the
Lender, impairs the Lender, s security or ability of the Borrower
or any Guarantor to discharge its obligation hereunder or which
impairs the rights of Lender in such Collateral.
Section 11.11 Environmental Claim. At any time the Lender
-------------------
determines that an environmental claim will have a potentially
material or adverse effect on the financial condition of the
Borrower.
Section 11.12 Failure to Notify. If at any time the Borrower
-----------------
fails to provide the Lender immediately with notice or copies, if
written, of all complaints, orders, citations or notices with
respect to environmental, health or safety complaints as set forth
in this Agreement.
Section 11.13 Failure of Documentation. The Borrower or any
------------------------
Guarantor shall fail to obtain and deliver to Lender any other
documentation required to be signed or obtained as part of this
Agreement or shall have failed to take any reasonable action
requested by Lender to perfect or protect the security interests
provided for herein.
Section 11.14 Death. If Xxxxxxx Xxxxx shall die.
-----
Section 11.15 Change in Management. If Xxxxxxx Xxxxx shall
--------------------
no longer be President and Chief Operating Officer.
Section 11.16 Non-Payment of Debts. If either of the
--------------------
Borrower or any Guarantor is not generally paying its debts as such
debts become due, except that non-payment of debts not in excess of
$25,000.00 which the Borrower or any of the Guarantors is
contesting in good faith shall not be an Event of Default under
this Agreement.
Section 11.17 Federal Tax-Lien. The filing of a tax lien
----------------
against the Borrower by the United States of America.
52
ARTICLE XII
REMEDIES
--------
Section 12.1 Acceleration; Proceed Against Collateral.
----------------------------------------
(a) Amount Due. Upon the occurrence of an Event of
----------
Default, the Default Amount shall, at the option of the Lender,
become immediately due and payable without notice or demand; and
(b) Possession of Collateral. The Lender may forthwith
------------------------
give written notice to the Borrower, whereupon the Borrower shall,
at its expense, promptly deliver any or all Collateral to such
place as the Lender may designate, or the Lender shall have the
right to enter upon the Property where the Collateral is located
and take immediate possession of and remove the Collateral as
permitted by the UCC without liability to the Lender except such as
is occasioned by the gross negligence of the Lender, its employees
or agents. In the event the Lender obtains possession of the
Collateral, in accordance with the UCC, and without limiting the
scope of Lender's rights, thereunder the Lender may sell any or all
of the Collateral at public or private sale, at such price or
prices as the Lender may deem best, either for cash, on credit, or
for future delivery, in bulk or in parcels and/or lease or retain
the Collateral repossessed using it or keeping it idle. Notice of
any sale or other disposition of the Collateral shall be given to
the Borrower at least three (3) days before the time of any
intended sale or disposition of the Collateral is to be made, which
the Borrower hereby agrees shall be reasonable notice of such sale
or other disposition. The Lender may also elect to retain the
Collateral or any part thereof in satisfaction of the Obligation or
any future obligations upon notice of such proposed election to
Borrower and to any other party as may be required by the UCC. The
proceeds, if any, of any such sale or leasing by the Lender shall
be applied: First to the payment of all fees and expenses
including without limitation any legal fees and expenses incurred
in repossessing the Collateral and selling and/or leasing it;
Second to pay the Default Amount to the extent not previously paid
by the Borrower; and Third, to pay any excess remaining thereafter
to the Borrower.
(c) Outstanding Obligations. The Lender shall have the
-----------------------
rights with respect to any outstanding notes of Borrower, any and
all collateral which the Lender has a security interest by this
Agreement or otherwise, provided in the notes, this Agreement and
the UCC.
(d) Expenses. Add to the Obligation or any future
--------
obligations, the Lender's reasonable expenses to obtain or enforce
payment of the Obligation hereunder and the enforcement or
liquidation of any debt hereunder shall include reasonable
attorneys' fees, plus other legal expenses incurred by Lender.
53
(e) Deficiency. Borrower shall remain liable for any
----------
deficiency resulting from a sale, lease, foreclosure or other
disposal of the Collateral and shall pay any deficiency forthwith
on demand, together with per annum interest thereon at the rate set
forth in this Agreement.
(f) Other Obligations. Declare all other loans, sums
-----------------
and obligations owed to Lender under any other agreement or loan
between Lender and the Borrower together with all accrued interest
and all other lawful and proper charges thereon to be forthwith due
and payable, whereupon all such sums shall forthwith become
immediately due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly
waived by the Borrower.
Section 12.2 Set-off. The Lender shall have the right,
-------
immediately and without notice of other action to set-off against
any of the Borrower's liabilities to the Lender any money owed by
the Lender (or any affiliate of the Lender) in any capacity to the
Borrower, whether or not due, and the Lender shall be deemed to
have exercised such right of set-off and to have made a charge
against any such money immediately upon the occurrence of such
Event of Default even though the actual book entries may be made at
a time subsequent thereto.
The right of set-off granted hereunder shall be effective
irrespective of whether the Lender shall have made demand under or
in connection with the Loan. The Lender is hereby granted a
security interest in all such money and property being held by it,
which security interest shall be a first priority perfected
security interest in favor of the Lender as a result of the
Lender's possession of the collateral. None of the rights of the
Lender described in this Section 12.2 is intended to diminish or
limit in any way the Lender's common-law set-off rights.
Section 12.3 Cumulative Remedies; Waivers. No remedy
----------------------------
referred to herein is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or
otherwise available to the Lender at law or in equity. No express
or implied waiver by the Lender of any default or Event of Default
hereunder shall in any way be, or be construed to be, a waiver of
any future or subsequent default or Event of Default. The failure
or delay of the Lender in exercising any rights granted it
hereunder upon any occurrence of any of the contingencies set forth
herein shall not constitute a waiver of any such right upon the
occurrence, continuation, or recurrence of any such contingency or
similar contingency and any single or partial exercise of any
particular right by Lender shall not exhaust the same or constitute
a waiver of any other right provided herein. The Events of Default
and remedies thereon are not restrictive of and shall be in
addition to any and all other rights and remedies of the Lender
provided for by this Agreement and applicable law.
54
Section 12.4 Other Property. The Lender shall have a
--------------
security interest in any other property, tangible or intangible,
owned by or in which the Borrower has an interest which is or may
hereafter be in the possession of the Lender.
Section 12.5 Costs and Expenses. The Borrower shall be
------------------
liable for all costs, charges and expenses, including reasonable
attorney's fees and disbursements, incurred by the Lender by reason
of the occurrence of any Event of Default or the exercise of the
Lender's remedies with respect thereto.
Section 12.6 No Marshalling. The Lender shall be under no
--------------
obligation whatsoever to proceed first against any of the
Collateral before proceeding against any other of the Collateral.
It is expressly understood and agreed that all of the Collateral
stands as equal security for all Obligations, and that the Lender
shall have the right to proceed against any or all of the
Collateral in any order, or simultaneously, as in its sole and
absolute discretion it shall determine. It is further understood
and agreed that the Lender shall have the right, as it in its sole
and absolute discretion shall determine, to sell any or all of the
Collateral in any order or simultaneously.
Section 12.7 No Implied Waivers; Rights Cumulative. No delay
-------------------------------------
on the part of the Lender in exercising any right, remedy, power or
privilege hereunder or under any of the Loan Documents or provided
by statute or at law or in equity or otherwise shall impair,
prejudice or constitute a waiver of any such right, remedy, power
or privilege or be construed as a waiver of any Event of Default or
as an acquiescence therein. No right, remedy, power or privilege
conferred on or reserved to the Lender hereunder or under any of
the Loan Documents or otherwise is intended to be exclusive of any
other right, remedy, power or privilege. Each and every right,
remedy, power or privilege conferred on or reserved to the Lender
hereunder or under any of the Loan Documents or otherwise shall be
cumulative and in addition to each and every other right, remedy,
power or privilege so conferred on or reserved to the Lender may be
exercised by the Lender at such time or times and in such order and
manner as the Lender shall (in its sole and complete discretion)
deem expedient.
Section 12.8 Rescission of Rights of Borrower. Upon the
--------------------------------
occurrence of an Event of Default:
(a) All rights of the Borrower to receive the principal
and interest payments which it would otherwise be authorized to
receive and retain pursuant to this Agreement shall cease, and all
such rights shall thereupon become vested in the Lender, so long as
an Event of Default shall continue, who shall thereupon have the
sole right to receive and hold as collateral such principal and
interest payments;
55
(b) All rights of the Borrower to exercise the voting
and other consensual rights which it would otherwise be entitled to
exercise pursuant to this Agreement shall cease, and all such
rights shall thereupon become vested in the Lender who shall
thereupon have the sole right to exercise such voting and other
consensual rights;
(c) All rights of the Borrower to receive the dividends
which it would otherwise be authorized to receive and retain
pursuant to this Agreement shall cease, and all such rights shall
thereupon become vested in the Lender who shall thereupon have the
sole right to receive and hold as collateral such dividends; and
(d) Any and all principal, interest and dividends which
are received by the Borrower contrary to the provisions of this
Agreement shall be received in trust for the benefit of the Lender,
shall be segregated from other funds of the Borrower, and shall be
forthwith paid over to the Lender as Collateral in the same form so
received (with any necessary endorsement).
In order to permit the Lender to exercise the voting and other
rights which it may be entitled to exercise pursuant to this
Agreement, and to receive all dividends and distributions which it
may be entitled to receive under this Agreement, the Borrower
shall, if necessary, upon written notice from the Lender, from time
to time execute and deliver to the Lender appropriate dividend
payment orders and other instruments, including, without
limitation, proxies, as the Lender may reasonably request.
56
ARTICLE XIII
MISCELLANEOUS RIGHTS AND DUTIES OF LENDER
-----------------------------------------
Section 13.1 Charges Against Credit Balances. The Lender,
-------------------------------
without demand and acting in its sole and absolute discretion, in
each instance, may charge and withdraw from any credit balance
which the Borrower may then have with the Lender or which the
Borrower may have with any affiliate of the Lender, any amount
which shall become due from the Borrower to the Lender under this
Agreement. The Lender, within a reasonable time thereafter, shall
advise the Borrower of each such charge.
Section 13.2 Collections; Modifications of Terms. The Lender
-----------------------------------
may, in its sole and absolute discretion, and at any time with
respect to any of the Collateral, demand, collect or receive any
money or property, at any time payable or receivable on account of
or in exchange for, or make any compromises it deems desirable
including without limitation extending the time of payment,
arranging for payment in installments, or otherwise modifying the
terms or rights with respect to any of the Collateral, all of which
may be effected without notice to or consent by the Borrower and
without otherwise discharging or affecting the Obligations, the
Collateral or the security interest granted hereunder.
Section 13.3 Notification of Account Debtors and Bailees of
----------------------------------------------
Inventory. At any time, prior to or after an Event of Default
---------
hereunder, the Lender may notify the account debtors on any of the
Accounts Receivable to make payment directly to the Lender, and the
Lender may endorse all items of payment received by it which are
payable to the Borrower. The Borrower, at the request of the
Lender, shall notify the account debtors of the Lender's security
interest in its Accounts Receivable. Until such time as the Lender
elects to exercise its right to notification, Borrower is
authorized to collect and enforce the Accounts Receivable. At any
time, the Lender may, in its sole and absolute discretion, notify
the bailee of any Inventory of its security interest therein.
Section 13.4 Uniform Commercial Code. At all times prior and
-----------------------
subsequent to an Event of Default hereinafter, the Lender shall be
entitled to all the rights and remedies of a secured party under
the UCC with respect to all Collateral.
Section 13.5 Preservation of Collateral. At all times prior
--------------------------
and subsequent to an Event of Default hereinafter, the Lender may
take any and all action which in its sole and absolute discretion
is necessary and proper to preserve its interest in the Collateral,
including without limitation the payment of debts of the Borrower
which might, in the Lender's sole and absolute discretion, impair
the Collateral or the Lender's security interest therein,
purchasing insurance on the Collateral, repairing the Collateral,
or paying taxes or assessments thereon, and the sums so expended by
57
the Lender shall be secured by the Collateral, shall be added to
the amount of the Obligation due the Lender and shall be payable on
demand with interest at the rate set forth in Section 2.4 hereof
from the date expended by the Lender until repaid by the Borrower.
Section 13.6 Lender's Right to Cure. In the event the
----------------------
Borrower shall fail to perform any of its Obligations hereunder or
under any of the Loan Documents, then the Lender, in addition to
all of its rights and remedies hereunder, may perform the same, but
shall not be obligated to do so, at the cost and expense of the
Borrower. In any such event, the Borrower shall promptly reimburse
the Lender together with interest at the rate set forth in Section
2.4 hereof from the date such sums are expended until repaid by the
Borrower.
Section 13.7 Test Verifications. The Lender shall have the
------------------
right to make test verifications of any and all Accounts Receivable
in any manner and through any medium the Lender considers
advisable, and the Borrower shall render any necessary assistance
to the Lender.
Section 13.8 Power of Attorney. The Lender is hereby
-----------------
irrevocably appointed by the Borrower as its lawful attorney and
agent in fact to execute financing statements and other documents
and agreements as the Lender may deem necessary for the purpose of
perfecting any security interests, mortgages or liens under any
applicable law. Further, the Lender is hereby authorized to file
on behalf of the Borrower, in its name and at its expense, such
financing statements, continuation statements, documents or
agreements in any appropriate governmental office. The Lender
shall give the Borrower notice of any filings made hereunder. The
Borrower hereby grants a Power of Attorney to the Lender to endorse
the Borrower's name on checks, notes, acceptances, drafts and any
other instruments requiring the Borrower's endorsement, to change
the address where the Borrower's mail should be sent and to open
all mail and to do such other acts and things necessary to
effectuate the purposes of this Agreement. All acts by the Lender
or its designee are hereby ratified and approved, and neither the
Lender, nor its designee shall be liable for any acts of omission
or commission, or for any error of judgment or mistake. The
Borrower hereby grants a Power of Attorney to the Lender to file
proofs of loss respecting the Collateral with the appropriate
insurer and to endorse any checks or drafts constituting insurance
proceeds. The powers of attorney granted to the Lender in this
Agreement are coupled with an interest and are irrevocable so long
as this Agreement is in force.
Section 13.9 Relief from Bankruptcy Stay. The Borrower
---------------------------
agrees that, in the event that the Borrower, any Guarantor or any
of the persons or parties constituting the Borrower or a Guarantor
shall (i) file with any bankruptcy court of competent jurisdiction
or be the subject of any petition under Title 11 of the U.S. Code,
58
as amended ("Bankruptcy Code"), (ii) be the subject of any order
for relief issued under the Bankruptcy Code, (iii) file or be the
subject of any petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law
relating to bankruptcy, insolvency, or other relief for debtors,
(iv) have sought or consented to or acquiesced in the appointment
of any trustee, receiver, conservator, or liquidator, or (v) be the
subject of any order, judgment, or decree entered by any court of
competent jurisdiction approving a petition filed against such
party for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to
bankruptcy, insolvency or relief for debtors, the Lender shall
thereupon be entitled and the Borrower irrevocably consents to
immediate and unconditional relief from any automatic stay imposed
by Section 362 of the Bankruptcy Code, or otherwise, on or against
the exercise of the rights and remedies otherwise available to the
Lender as provided for herein, in the Note, other loan documents
delivered in connection herewith and as otherwise provided by law,
and the Borrower hereby irrevocably waives any right to object to
such relief and will not contest any motion by the Lender seeking
relief from the automatic stay and the Borrower will cooperate with
the Lender, in any manner requested by the Lender, in its efforts
to obtain relief from any such stay or other prohibition.
59
ARTICLE XIV
SECURITY INTEREST
-----------------
Section 14.1 Security Interest.
-----------------
(a) As collateral security for (i) the due and punctual
payment of the Advances, all interest thereon and any and all
extensions, renewals, substitutions and changes in form thereof;
(ii) the obligations and all other obligations of the Borrower to
the Lender; and (iii) all costs and expenses incurred or paid by
the Lender to enforce its rights pursuant to this Agreement, the
Loan Documents or otherwise (including without limitation
attorneys' fees), the Borrower hereby pledges, transfers, assigns,
sets over and grants to the Lender, a security interest in the
Collateral whether now owned or existing or hereafter arising or
acquired and wherever located, and made a part hereof.
(b) All Collateral heretofore, herein or hereinafter
given to the Lender shall secure payment of the Advances, the
Obligations and all of the Borrower's other obligations to the
Lender, and the Lender shall be under no obligation to proceed
against any or all of the Collateral before proceeding directly
against the Borrower.
Section 14.2 Continuation of Security Interest. The security
---------------------------------
interest granted in this Agreement shall continue in full force and
effect until the Borrower has fully paid and discharged all of the
sums referred to in this Agreement hereof and until this Agreement
is terminated and all obligations of the Borrower to the Lender are
satisfied.
Section 14.3 Cross Collateralization. The Collateral under
-----------------------
this Agreement secures the Obligations now or hereafter outstanding
under all other agreements between the Lender and the Borrower
and/or affiliates of the Borrower and the Collateral pledged under
any other agreement between the Lender and the Borrower and/or
affiliates of the Borrower secures the Obligations under this
Agreement.
Section 14.4 Construction. This Agreement constitutes a
------------
security agreement under the UCC. Borrower shall execute, file and
refile such financing statements, continuation statements or file
security agreements as the Lender shall require from time to time.
60
ARTICLE XV
PROVISIONS OF GENERAL APPLICATION
---------------------------------
Section 15.1 Waivers. The Borrower waives demand,
-------
presentment, notice of dishonor or protest of any instrument either
of the Borrower or others which may be included in the Collateral.
Section 15.2 Consents. The Borrower consents:
--------
(a) to any extension, postponement of time of payment,
indulgence or to any substitution, exchange or release of
Collateral.
(b) to any addition to, or release of, any party or
persons primarily or secondarily liable, or acceptance of partial
payments on any Accounts Receivable or instruments and the
settlement, compromising or adjustment thereof.
Section 15.3 Survival. All covenants, agreements,
--------
representations and warranties made by the Borrower herein or in
any of the Loan Documents or in any certificate or instrument
contemplated hereby shall survive any independent investigation
made by Lender and the execution and delivery of the Agreement, and
said certificates or instruments and shall continue so long as any
Obligations are outstanding and unsatisfied, applicable statutes of
limitations to the contrary notwithstanding.
Section 15.4 Notices, Written; Effective Date. All notices
--------------------------------
and other communications hereunder shall be in writing and shall be
deemed to have been duly given when sent by registered or certified
mail, return receipt requested.
(a) Notices to the Lender shall be directed to the
following address:
Summit Commercial/Gibraltar Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: President
With a copy to: Xxxxx Xxxxxxx Xxxxxxx, P.C.
Continental Plaza II
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
61
(b) Notices to the Borrower shall be directed to the
following address:
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: President
With a copy to: Xxxxx Xxxxxx, Esq.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
All notices, payments, requests, reports, information or demands so
given shall be deemed effective upon receipt or, if mailed, upon
receipt or the expiration of the third day following the date of
mailing, whichever occurs first, except that any notice of change
in address shall be effective only upon receipt by the party to
whom said notice is addressed. The failure to copy the applicable
attorney with any notice shall not invalidate the notice.
Section 15.5 Termination. The Borrower may terminate this
-----------
Agreement at any time upon:
(i) Sixty (60) days' written notice to the Lender
of intention to do so; and
(ii) paying to the Lender in full all of the
Borrower's obligations, including any Early Termination Fees that
may be due.
(a) Notwithstanding the termination of this Agreement as
herein provided, the Lender's security interest, rights and
remedies herein set forth shall remain in full force and effect
until all of the Borrower's obligations are paid in full.
Section 15.6 Amendments. The terms of this Agreement shall
----------
not be waived, altered, modified, supplemented or terminated in any
manner whatsoever except by a written instrument signed by the
Lender and the Borrower.
Section 15.7 Binding on Successors. This Agreement shall be
---------------------
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
Section 15.8 Invalidity. Any provision of this Agreement
----------
which may be determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
62
Section 15.9 Expenses of Lender. The Borrower agrees to pay
------------------
all costs and expenses of the Lender in connection with the
preparation, execution, delivery and administration of this
Agreement, the Loan Documents and other instruments and documents
to be executed contemporaneously herewith, including reasonable
attorneys' fees and out of pocket expenses of Special Counsel for
the Lender.
Section 15.10 Section or Paragraph Headings. Section and
-----------------------------
paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
Section 15.11 Governing Law. This Agreement shall be
-------------
construed in accordance with, and shall be governed by, the laws of
the State of New York.
Section 15.12 WAIVER OF JURY TRIAL. THE BORROWER HEREBY
--------------------
WAIVES ANY AND ALL RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE UNDER
THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE TO A TRIAL BY
JURY OF ANY AND ALL ISSUES ARISING EITHER DIRECTLY OR INDIRECTLY IN
ANY ACTION OR PROCEEDING BETWEEN THE BORROWER, THE LENDER OR ITS
SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS. IT IS INTENDED THAT SAID
WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, AND/OR
COUNTERCLAIMS IN ANY ACTION OR PROCEEDINGS.
IN WITNESS WHEREOF, the undersigned have set their hands and
seals or caused these presents to be executed by their proper
corporate officers and sealed with their seal the day and year
first above written.
ATTEST: CADAPULT GRAPHIC SYSTEMS, INC.
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxx
--------------------- -------------------------
Secretary Xxxxxxx Xxxxx, President
SUMMIT COMMERCIAL/
GIBRALTAR CORP.
By: Xxxxx Xxxxx
-------------------------
Vice President
63
SCHEDULE "A"
------------
Location of Principal Office
and Location of Collateral
Principal Office
----------------
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Other Locations
---------------
000 Xxxx Xxxx
Xxxxxx, Xxx Xxxx
000 0xx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx
00 Xxxxxxx Xxxxx, Xxxx 00 xxx 00
Xxxxxxxxx, Xxxxxxxxxxxxx
